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Can Fintechs Win the Regulatory Compliance Game? Advisors and CEOs Share Tips (Relevant)

Compliance has never been easy for Fintechs. But when the regulatory landscape started to change fast, things became even more complicated. New and updated regulations came into force, such as the changes introduced by PSD2. It seems like companies are in a race to catch up with them. On the other hand, the UK’s Financial Conduct Authority (FCA) is also racing to keep up with innovative business models and consider how, or if, they fit within the current regulatory perimeter.

FinTech business actions have come under close regulatory scrutiny recently, accompanied by a focus on business continuity planning. The pandemic has impacted every side of society, and WFH (Work From Home) was quite a trigger to raise protection issues and let the compliance evolution start. Brexit has stretched the tension, and there was no time to ask “when on earth will it finally end?”.

Millions of dollars of investments and incredible valuations in the FinTech field make it particularly important to stay on top of any risks. So, we interviewed top FinTech Advisors within Regulatory Compliance and CEOs of game-changing startups to find out how they do it every single day.

When you’re reading this article, you may find their unique stories help your future steps.

We were delighted to welcome the listed fintech experts:

–          David M. Brear, CEO and Co-Founder of 11:FS

–          Phil Vidler, CEO at FinTech Alliance

–          Andrea de Gottardo, Chief Executive at Kroo

–          James Borley, Payment Services Client Director at Compliancy Services 

–          Henry Talbot-Ponsonby, President and Co-Founder of Bite Investments

–          Alex Batlin, Founder and CEO at Trustology

–          Nick Jones, Co-Founder & CEO at Zumo

–          Mykyta Sokolov, Senior Associate at PSP Lab


The regulatory landscape of the UK’s FinTech industry

FinTech is a complex industry, and its regulation can take many forms. Sometimes it takes so much time and effort for FinTech players to learn all the rules and adjust to them, but this is vital to succeeding in this highly competitive market.

Phil Vidler, CEO at FinTech Alliance:

“The UK prides itself on right-touch regulation, which means the regulator seeks to understand problems in the market and ensure that regulation is proportional to risk. This helps to avoid stifling innovation. We’re also lucky to have an environment where the regulator, government, and industry work closely together – though this can always be improved. The FCA’s Project Innovate has positioned itself as the most forward-thinking regulator in the market.”

Ride those regulatory waves rather than panic or deny them! Regulation is usually seen as something that stops people from doing what they want to do. Therefore, a founder with a great idea is often intimidated or reluctant to engage with it, says Phil Vidler, so compliance teams end up with a negative reputation.

David M. Brear, CEO and Co-Founder of 11:FS, thinks that regulation is always being seen as a bit of a moat when, in fact, it can level up your business:

“New opportunity is created when regulation changes. Being compliant is often seen as a low bar for people to try and get over, but when you try to maximise the opportunities that regulation brings about – then you look at the market in a completely different way. Being compliant is super important, but I think seeing it as “a box that you tick” is where most organisations leave opportunity on the table.”

Compliance challenges for the UK FinTechs; CEOs’ best recommendations on how to keep the lights on

So what makes people think regulations = barriers? Why do many applications fail?

It turns out that the primary reasons are: the lack of understanding of the regulatory landscape, lack of knowledge and experience of operating within a regulatory environment.

James Borley, Payment Services Client Director at Compliancy Services:

“It’s about getting the right people in place at the right time because, quite often, entrepreneurs and innovators know their tech and the “bright idea”, but they don’t understand how it fits in the regulatory environment, what knowledge and experience they need to demonstrate or bring on board in order to satisfy regulatory requirements.”

A “compliant approach” is something that investors look for in business if they consider investing in it.

Nick Jones, Co-Founder & CEO at Zumo:

“In the past, we were pretty disappointed that investors didn’t see our regulatory and compliance approach to be particularly important, because, in the past, the market was going bananas. So now, all of a sudden, investors are very interested in companies like ours that have taken the “compliance-first-approach”. Several companies are now running around trying to retrofit a “kind of compliant approach” to their businesses, but you only have to read the news to see very deep underlying behavioural problems, potential to cause problems with the regulators.”

It became clear that, statistically, no one can get into the details of “WHY” they fail, because a lot of firms choose to withdraw their applications.

So, we found out that FCA indicates to the applicant firm that it proposes to refuse the application before actually doing it. And rather than going through that formal refusal process, companies can withdraw their request. As such, there is no Decision Notice published from which we can identify the grounds for the application being unsuccessful.

Experts highlighted that the lack of time and resources have become quite a hurdle for many startups. Apparently, startups need to find sufficient financial support, both to fund their plans and meet their regulatory capital obligations, and a decent regulatory consultancy.

Phil Vidler, CEO at FinTech Alliance:

“In the world of FinTech, six months is a very long time, and having to put things on hold or wait for approval can cause problems. In addition, they can’t always afford to hire experts on regulation right from the beginning, so they need to find support elsewhere.”

This raises the question – how to decrease spending and save precious time? Most experts recommended turning to advisors.

Henry Talbot-Ponsonby, President and Co-Founder of Bite Investments:

“The one “trick” I know is to hire a good lawyer and not view it as a battle but a collaboration with the FCA. The FCA is a very reasonable and constructive regulator. Make sure you have a lawyer who understands the theme and can explain the logical progression of where we are and what the FCA is comfortable with.”

It seems that becoming FCA compliant requires a lot of work. So, how can a company prepare the application to the FCA in the most effective way? And what should you think of before applying?

Andrea de Gottardo, Chief Executive at Kroo:

“Check and think whether you can go for a different type of licence or an alternative path. Once you decide to apply, there are a certain number of thresholds you need to meet, a certain number of conditions and those are non-negotiable.”

Phil Vidler, CEO at FinTech Alliance:

“According to the experiences of the FinTechs we regularly engage with, the key aspect going forward will be embracing RegTech partners, who can help both FinTechs and financial institutions to automate their regulatory compliance. This sector is beginning to grow, and for a good reason – if businesses are faced with those time and cost constraints, automation can help them concentrate on growing as opposed to worrying about compliance all the time.”

Nick Jones, Co-Founder & CEO at Zumo:

“Find someone else to find an advisory firm, etc. Just make sure that you’re saying the right things at the right time to the FCA, and not getting them to lift information. Experience is number one. The second one is Technical shortcuts: pick the best compliance solutions that will scale with you over time. Understand the trend pick – the best technology solutions. Try and get as much knowledge on the team. That would be my advice.”

Confused with the complexity of regulations? Compliance, the experts emphasize, provides a “total check” for your product in the context, not just a superficial estimation of your idea – patience is the best trait you need to nurture.

Henry Talbot-Ponsonby, President and Co-Founder of Bite Investments:

“You may feel like you have got a great solution, a great business model, something that is going to revolutionise finance… but you may not appreciate all of the ramifications of that in the wider industry. You need to put yourself in a regulator’s mindset – and have a lot of patience.”

Networking and knowledge-sharing communities can also help those on their FinTech compliance journey get valuable insights and support.

Phil Vidler, CEO at FinTech Alliance:

“FinTechs can engage with one another in a non-competitive environment to discuss experiences and challenges they’ve faced in the regulatory landscape. The reason the UK is a FinTech world leader is the strength of its wider supporting professional services network, including renowned consultants, lawyers and more who can provide critical expertise on all aspects of regulation and compliance.”

David M. Brear, CEO and Co-Founder of 11:FS:

“It’s very hard to change the world without some money behind you. 11:FS is a five-and-a-half-year-old bootstrap business, so I can 100% testify that it’s difficult but not impossible. The customer landscape is changing so dramatically.”

Nick Jones, Co-Founder & CEO at Zumo:

“Work with the best partners and people who can prove that they work with other businesses that are regulated and compliant in exactly your space.”

Even though any compliance journey can take a while, constantly requiring a pretty penny and tons of attention, the result of being compliant is worthy. Our leaders have spoken with one voice:

  1. Helps attract investment
  2. Strengthens credibility
  3. Protects your rights and your customer’s rights
  4. Balances the economy of the UK
  5. Permits you to operate in the UK market

Understanding the importance of being compliant in 2021, and beyond, you had better plan your next steps on how to align with the rapidly changing regulatory environment.

Mykyta Sokolov, the Senior Associate at PSP Lab, also insists:

“To be compliant, you must be aware of all the regulations applicable to your company. There are plenty of resources where you can find information. Once you know the requirements applicable to your company, you should conduct a risk assessment tailored to your specific business model. Based on your analysis, you must build a robust risk management framework consisting of policies, procedures, tools, software, and training. Even you do not need a license to operate, your company still must mitigate the risk of being non-compliant with applicable laws.”

Andrea de Gottardo, Chief Executive at Kroo:

“My personal view, the biggest challenge that actually is across both banking and FinTech comes around financial crime. Having all the controls, the skills, and the capability developed as early as possible – is one of the best pieces of advice I can give. Always think how someone with bad intent can potentially leverage what you’re offering, with a good heart, to commit a financial crime and how can I stop that.”

Phil Vidler, CEO at FinTech Alliance:

“The FCA offers help and advice, so it’s important to look at the resources available – not just in terms of the handbook and guidelines, but there are many webinars, events, and online articles that help break the regulations down into more manageable, understandable advice.”


Internal experts vs. external advisors. How can firms choose the right option?

The necessity to react promptly to changes and a vital need for competence brings us to the next spot we would love to shed the light on – the compliance team. And when it comes to the compliance team, we are inevitably faced with a tough decision – Internal experts versus external advisors. How to find your ‘one and only’?

Andrea de Gottardo, Chief Executive at Kroo:

“I would always recommend building out your compliance team as soon as you can, build it in-house, scale it in-house because there is nothing that is of the same value as having your own team, The in-house compliance team is so important – develop that early on.”

Alex Batlin, Founder and CEO at Trustology:

“We have both an internal compliance team as well as external advisors, it’s really important to have external advisors because you always want a fresh independent look at what’s happening. And having that third-party perspective, in my opinion, is really important. The advantage of an internal team – knowing your customers well, because if you’re an external console, it’s very difficult to know your customer and understand patterns.”

So, what does the right Compliance Officer and the perfect Advisor look like?

Andrea de Gottardo, Chief Executive at Kroo:

“Number one – skills and capability: does this person have the skills and previous experience that could be leveraged in terms of what you need from them to do. The second thing, and probably even more important – the approach and if this person is motivated.”

Henry Talbot-Ponsonby, President and Co-Founder of Bite Investments:

“If you get up every day to be a specialist in compliance, you will inevitably be an expert. You need someone who is commercially minded and views regulation as a challenge to solve, rather than a roadblock. When choosing a compliance officer for my own business, I would hire someone who has done it before. Maybe they have been with the FCA or at a law firm – long enough for them to have seen compliance in the real world so the jump into an entrepreneurial environment is easy.”

We greatly appreciate every minute our speakers shared with us to explain the FCA compliance journey from the inside. They remind us that, whether Businesses or Regulators, we’re all human. People become stronger and more progressive by working together, supporting each other’s business, and striving for the top.