The Strategic Agility of Fintech Compliances
Fintech has become one of the hottest industries in the last few years. Thanks to technology’s mammoth scope and potential, fintech has successfully disrupted traditional processes and paved the way for novelty and innovation. With countless fintech startups and companies emerging globally, the regulation and compliance landscape within fintech has been compelled to increase its agility. New technologies, ideas, and innovations are continuously evolving, keeping regulatory bodies, agencies, and governments on their toes.
Fintech has branched out to include a diverse stream of financial services, ranging from customer service, cryptocurrencies, and remittance to insurance, digital assets, and digital investments. Although fintech has gained immense ground worldwide as more countries actively turn their wheels toward digital innovation, a massive area remains unexplored, making it mandatory for the world to gear up for more fintech dependency.
The regulatory environment of fintech has remarkably kept up with the perennial developments disrupting the financial sector. But with such immense changes taking place at domestic and international levels, the race for monitoring regulatory practices among all fintech organizations has only grown more intense.
Fintech supplements fewer boundaries, broader connectivity, data collection and analysis, and quicker transactions, making it highly vulnerable to financial risks. Data has become one of the most valuable assets any entity can own. With companies continuously storing personal data, the risk of data manipulation, cyber threats, and attacks become even graver in the financial spectrum. Such threats and risks demand streamlined systems, up-to-date regulations, futuristic protocols, and extensive monitoring of all fintech activities.
Challenges Faced by Regulations and Compliance
Nothing good comes without challenges. Regulations are hindered continuously from overpowering the fintech landscape. Some of these challenges are:
High-Cost
Compliance and regulations are expensive. Exploring and adhering to all the different standards and regulations that could impact the business potentially can become painstaking tasks for most, resulting in lag from startups and other fintech organizations to fulfill these requirements.
Continuous Development
No road reaches the end of fintech completion, implying that developments and innovations in this stream of technology remain endless. With a colossal potential for growth, the compliance sector within fintech can never rest. Regulations and compliances are obligated to stay ahead of novel ideas and innovations, which could potentially disrupt the system.
Endless Risks
The riskiness of venturing into fintech increases as financial data gains importance. Data breaches, manipulation, cyber attacks, etc., continuously hang in front of regulatory agencies, compelling them to relentlessly strive towards tackling such crimes.
Exposure to Technology
There is immense exposure to top-rated technology worldwide, which equips cyber criminals with better vantage to manipulate data for their benefit. Pausing or reducing such exposure to innovative technology would significantly impact the positive side of fintech novelty.
Continuous Investment
Regulations and compliance are a continuous investment, requiring companies to keep track of new and updated regulations. Expecting all fintechs to persistently invest their time and money into adhering to new standards and protocols can result in considerable gaps.
Here is where the need for compliance to be strategically agile comes into play.
To produce the most effective results and remain actively agile in these times of constant fintech development, the prioritization of the following areas in the regulatory spectrum of fintech becomes important:
Data Privacy
As data gains more value, the need to protect data from breaches and manipulation becomes critical. Financial data breaches can cause monumental damage, making it one of the most vital sectors for regulations to focus on. By employing technology or developing standards that strictly regulate or mandate certain activities, regulations can attain the upper hand.
Initial Phase of Development
Compliances should also focus on regulating business activities from their onset or developmental stage. Once the initial phase has been monitored, assessed, and cleared, only then should businesses be allowed to expand. Such monitoring can also include “sandboxes” which would help analyze new technologies and increase overall security and safety.
Blockchain Technologies
Blockchain technology has proven to be immensely secure as it increases transparency and removes power from the hands of a few by making data available to everyone. Such transparency and decentralization can positively affect the workings of the fintech industry. By expanding the application of blockchain technology, data and financial security can be increased substantially.
Final Notes
Regulations and compliance are integral parts of the fintech world, which would crumble down if not for these standards and protocols. Not only do regulations make the fintech environment secure and safe, but they also act as guiding principles for companies. Increasing transparency and the strategic agility of regulations and compliances can reinforce this protection shield. The future of fintech is unimaginable, making it obligatory for regulatory bodies to increase their effectiveness.
