In the rapidly evolving world of FinTech, staying ahead of regulatory challenges is paramount. Managing directors and CEOs bring their expertise to the forefront in this discussion. From the lack of established regulatory guidelines to dealing with data-localization laws, this article compiles insights from six industry leaders. Discover the key regulatory hurdles and how to navigate them effectively.
- Lack of Established Regulatory Guidelines
- Compliance with Data Privacy Laws
- Adapting to eIDAS 2.0
- Navigating Licensing Requirements
- Managing Third-Party Vendor Compliance
- Dealing with Data-Localization Laws
Lack of Established Regulatory Guidelines
One regulatory challenge that FinTech companies face when implementing new technologies is often the lack of established rules and best practices from regulatory bodies as to what the guidelines should be around new tech. FinTech companies often face a challenge when their tech solutions are too far ahead of the pace of regulatory bodies to issue standards around them.
A good example involves new and emerging technologies like generative AI, which requires large amounts of data to be effective. For FinTech companies, this means that their customers may not want to share their own proprietary data for use in things like large-language models, which effectively become public, thereby negating the privacy standards and fiduciary obligations that financial firms have for their end clients.
David Csiki
Managing Director, INDATA
Compliance with Data Privacy Laws
At Tech Advisors, we often see FinTech companies facing significant regulatory challenges, especially around compliance with data privacy and security laws. When FinTechs adopt new technologies like AI, blockchain, or enhanced data analytics, they quickly encounter stringent requirements from laws such as the General Data Protection Regulation (GDPR) or the California Consumer Privacy Act (CCPA). These regulations set specific guidelines on how data should be collected, processed, and stored. I recall Elmo Taddeo from Parachute mentioning how non-compliance can lead to steep fines and erode customer trust—two things FinTech companies can’t afford.
One of the most pressing challenges is ensuring that any tech integration complies with these evolving legal frameworks. FinTech companies must stay on top of local and international laws, which can differ widely and update frequently. For instance, blockchain may offer transparency, but with decentralized data storage, it can be tricky to comply with “right-to-be-forgotten” laws under GDPR. Companies in our field have to collaborate closely with legal experts before rolling out new features to avoid unintentional data exposure and ensure they respect all regulatory requirements.
A practical approach for FinTechs is to integrate compliance checks directly into their development cycles. When Elmo worked with us on a security-focused project, he emphasized how embedding legal reviews at each development stage allowed their team to catch potential compliance issues early. FinTech companies can benefit from a similar practice by having a proactive compliance strategy that includes regular audits and employee training. These steps can help reduce the risks of non-compliance and safeguard user trust, making FinTech solutions more secure and dependable.
Konrad Martin
CEO, Tech Advisors
Adapting to eIDAS 2.0
One key regulatory challenge fintech companies face today is preparing for the transformative potential of eIDAS 2.0 in the EU. This new regulation will soon introduce a European Digital Identity Wallet, initially designed to give EU citizens and residents seamless access to government and civil services across borders. While this starts as a government-driven initiative, the implications will extend far beyond—shaping our interactions across universities, healthcare systems, transport, and financial services.
In its early stages, the framework will focus on improving access to essential services. However, as adoption grows, these digital-identity wallets will likely become central to our entire digital lives, allowing users to control, verify, and share credentials in a wide range of scenarios. Imagine securely sharing your medical history across healthcare providers, verifying enrollment at a university, or authenticating with a financial institution—all while retaining control over what data is shared and with whom.
This shift is poised to be as significant as cloud computing was a decade ago. Where cloud technology redefined how we store and access data, decentralized identity systems powered by self-sovereign identity (SSI) principles will redefine how we share and protect personal information online. Instead of centralized databases, which are susceptible to breaches, eIDAS 2.0 promotes decentralized verification methods that reduce fraud risks and enhance privacy. This gives individuals greater agency over their digital identities and promotes trust across sectors.
For fintech companies, aligning with eIDAS 2.0 and similar regulations means adopting decentralized technologies, like verifiable credentials, that meet stringent standards of data privacy and security. This approach will ensure compliance while enabling companies to offer user-centered, transparent experiences that today’s digital-savvy consumers increasingly expect.
Adapting to this regulatory shift is challenging, but it’s also an opportunity to lead in a new era of digital identity. As eIDAS 2.0 and decentralized frameworks take hold, they promise a future where individuals can engage with entities across every area of life securely and on their own terms.
Tom Sargent
Head of Marketing, Vidos
Navigating Licensing Requirements
A major regulatory challenge FinTech companies may face when bringing new technologies to market is dealing with the licensing requirements. In many places, FinTechs must obtain specific licenses to offer certain financial services, and the process can be slow and complex. The challenge is that regulations usually lag behind the fast-paced technology, posing a real quandary for tech-driven models such as peer-to-peer lending platforms or digital-only banks. These models are often set up to be quick, scalable, and user-friendly, but the licensing process is anything but fast, making it tough for FinTechs to launch smoothly.
Take peer-to-peer lending, where the FinTech essentially connects lenders and borrowers directly through technology, often bypassing traditional banks. In many regions, this model requires a unique set of licenses because it doesn’t fit the conventional bank mold.
As a result, FinTechs are left waiting, sometimes for months, to get approved, which delays their ability to operate and scale. This regulatory lag can stall innovation and often requires FinTechs to spend extra resources on compliance teams just to keep up. For companies eager to move quickly and meet market demand, this regulatory gap can be a frustrating hurdle, but one that’s crucial to tackle to ensure long-term success.
Tracie Crites
Chief Marketing Officer, HEAVY Equipment Appraisal
Managing Third-Party Vendor Compliance
A major regulatory challenge thatFinTech companies face when implementing new technologies is managing third-party vendor compliance. When a FinTech company relies on third-party vendors for services like data processing, payment systems, or cloud storage, ensuring that these vendors meet all the necessary regulatory standards can be quite complex. Each vendor has its own processes and standards, which don’t always line up perfectly with the FinTech company’s requirements or the latest regulations. This adds a layer of difficulty, as the company needs to make sure that each vendor it partners with is fully compliant in order to avoid any legal or security issues.
Another part of this challenge is that regulatory standards are constantly evolving, especially in the FinTech world, where data privacy, security, and anti-fraud measures are major concerns. If a third-party vendor doesn’t keep up with these changes, the FinTech company that relies on them risks being vulnerable. This means FinTechs not only need to vet their vendors thoroughly from the start, but they also have to monitor them regularly to ensure that they stay compliant as regulations change. This constant monitoring process can be resource-intensive, especially for a company trying to balance rapid growth with regulatory compliance.
Daniel Vasilevski
Director & Owner, Bright Force Electrical
Dealing with Data-Localization Laws
What FinTech companies may face when implementing new technologies is dealing with data-localization laws. As more countries mandate that customer data stay within their borders, fintech firms find themselves wrestling with complex and sometimes contradictory regulations. Beyond simple compliance, they need to manage the financial and logistical burdens that come with storing data across multiple regions. For companies scaling globally, this means setting up costly local data centers or investing in complex data-routing methods to meet each jurisdiction’s standards.
Data-localization requirements aren’t static, either. A country might adjust its laws based on new cybersecurity concerns or changes in political priorities, which can throw a FinTech’s entire compliance framework off course. Imagine launching a seamless international payment platform, only to have one of your key markets change its data-storage requirements overnight. Adapting quickly in these situations isn’t simply a matter of flipping a switch. It can mean redeploying resources, restructuring systems, and sometimes even renegotiating contracts.
Mushfiq Sarker
Chief Executive Officer, LaGrande Marketing
