Compliance Challenges Mount for Fintechs in Canada
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As fintech companies continue to disrupt traditional banking and financial services, they are also facing increased exposure to regulatory requirements, sanctions, and legal actions. In this rapidly changing landscape, fintechs must navigate complex compliance challenges to ensure their success.
A New Era of Regulatory Oversight
Historically, fintechs have prided themselves on creating deep customer connections, navigating market trends agilely, and disrupting traditional competitors. However, recent regulatory developments suggest that the future of fintech will see a blurring of lines between fintechs and banks. Some fintechs are considering or pursuing bank charters, while others are working with banks to leverage their capabilities.
Recent Regulatory Actions
Increased Focus on Risk Management
Recent regulatory actions against fintechs share several traits, including increased focus on:
- Regulatory risks: Threats to the safety and soundness of financial institutions.
- Operational risks: Risks associated with the day-to-day operations of a fintech company.
- Reputational risks: Risks that can damage a fintech’s reputation and brand.
These actions suggest that consumers expect regulatory protection associated with fintech products and services that are bank-like, yet delivered through non-traditional channels.
The OCC’s Initiative: Supporting Responsible Innovation
The Office of the Comptroller of the Currency (OCC) has taken steps to support responsible innovation in the federal banking system, including granting special purpose national bank charters to fintech companies. This initiative has opened the door for fintechs to work collaboratively with regulators to develop solutions specific to their product offerings.
Why Compliance Matters
Despite these developments, fintechs can increase their potential for success by having solid risk management controls in place. A compliant company may be more attractive to:
- Consumers: Who expect regulatory protection associated with fintech products and services.
- Stakeholders: Who value a company’s commitment to compliance and risk management.
- Regulatory organizations: Who recognize the importance of compliance in ensuring the safety and soundness of financial institutions.
By prioritizing compliance, fintechs can differentiate themselves from competitors, gain market share, and drive revenue growth.
Staying Informed: The Key to Success
In this rapidly changing landscape, it is essential for fintechs to stay informed about the latest regulatory developments and best practices in compliance. By doing so, they can navigate the complex regulatory environment and ensure their continued success.
As Gina Primeaux, principal at Deloitte Risk & Financial Advisory, notes: “Regulatory compliance is a critical component of a fintech’s risk management strategy. Companies must prioritize compliance to avoid reputational damage and financial losses.”
Learn More
Visit Deloitte’s Regulatory and Operational Risk practice to learn more about the latest developments in fintech regulation and compliance.