The fintech sector serves as a prime example of the immense advantages gained from embracing innovation and digital disruption.
Maintaining a position at the forefront of progress has historically required relentless adaptation and continuous evolution. In turn, this has led to tech behemoths such as Meta, Uber, and WeWork adopting a mantra of “move fast and break things”, prioritising innovation above all else.
For a time, this strategy was effective. Companies deliberately tested the limits of existing regulations, guided by the belief that regulators would eventually adapt to their trailblazing advances.
However, this no longer seems to be the case. The summer of 2024 in fintech has seen a waning tolerance for regulatory infractions and a stronger emphasis on ensuring compliance from the outset. Now, it’s time for companies to adapt accordingly to this change.
How we got here
It’s probably not going to be controversial to say that the tech sector itself is somewhat to blame for this predicament. While most of the technological and digital innovations of the past decade generated improvements across people’s lives, a small minority opened the door for more nefarious activities. Whether through increased fraud or money laundering, it’s evident why regulators have felt compelled to act.
Sadra Hosseini, chief executive officer of Ryft
For startups, this paradigm shift has necessitated a profound re-evaluation of their strategies and outlook. Ensuring regulatory compliance from the earliest stages of product development is now non-negotiable.
Even well-established companies, particularly those in sectors like banking-as-a-service, are grappling with the increasing pressures from stricter regulatory demands and must adapt swiftly.
Making compliance cool
To stay competitive and compliant in today’s tightening regulatory environment, businesses of all sizes – especially startups – must recognise the renewed importance of compliance and integrate it into every aspect of their operations.
As a startup founder, I understand the instinct to resist regulatory constraints when developing innovative solutions. Yet, with a strategic approach, compliance need not be a hindrance; it can become a cornerstone of sustainable success.
By embedding compliance into their core strategies, startups can mitigate legal risks and create more sustainable growth pathways. This proactive approach not only helps in avoiding fines and sanctions, but also positions these companies as responsible and reliable players in their respective industries, helping to underline their long-term commitment and vision to the space they operate in.
What’s more, demonstrating a commitment to compliance can bolster credibility with investors, who are increasingly cautious of legal and regulatory risks.
It can also be a huge positive for customers, who are becoming increasingly aware of the risks of non-compliance in areas like finance and technology, where data privacy, security, and fraud prevention are paramount concerns.
Taking steps in the right direction
Indeed, with a few simple steps, startups can strike a balance between innovation and compliance, ensuring they continue to deliver groundbreaking products.
A useful approach is to develop a comprehensive roadmap detailing the relevant regulations and standards for the product. This roadmap helps in identifying potential legal hurdles early in the process, aligning product design with regulatory requirements from the outset.
Likewise, regularly conducting audits and updating compliance protocols are crucial to promoting adherence. These measures, along with ongoing employee training sessions, ensure everyone stays informed about compliance mandates and their significance.
It’s equally vital to allocate specific resources for compliance, regardless of the company’s size, and to consider implementing specialised compliance tools and management systems to simplify and enhance the process.
Building a culture of compliance
Moreover, fostering open dialogue about compliance keeps it at the forefront of your staff’s minds and cultivates a culture where compliance is actively managed, reducing the likelihood of unforeseen issues.
Maintaining an open line of communication with regulatory bodies can help in developing an understanding of their expectations and provide insights into upcoming regulatory changes.
By implementing these modest changes, startups can successfully navigate the balance between innovation and compliance. This allows them to develop transformative products that not only disrupt established industries, but also withstand rigorous regulatory scrutiny.
Although swift innovation has been the driving force behind many successful startups, today’s stringent compliance requirements call for a more refined strategy.
With the right approach, startup founders can adapt effectively to these evolving demands.
Sadra Hosseini is chief executive officer and co-founder of Ryft
