FinTech Challenges
Financial technology is developing faster than ever before, and banks can't keep up. Increasing competition and the introduction of FinTech unicorns nearly every quarter requires that the key players continually focus on innovation. However, technology can develop much faster than regulations. Regulatory constraints unique to the financial industry disrupt innovation. Keeping up with compliance is both expensive and tedious.
The regulatory costs for FinTech firms can vary based on operational factors and location. FinTech start-ups may be subject to limited regulatory oversight, with many unicorns claiming, "We aren't a bank, so we aren't concerned with compliance." Regulations may not be a barrier of entry for FinTech start-ups today, but the future may not be so bright. Perhaps an even larger concern for these fledgling companies is location. What is the cost of doing business across stateliness? Or, across the globe? Financial laws vary around the world, and many lawmakers are blowing the whistle on compliance in FinTech.
However, financial technology is evolving much faster than compliance and ultimately challenging traditional regulation. The disruption of financial technology forces governing agencies to act quickly. According to Deloitte Insights, "53 percent of Asian fintech investors cite tightening regulations as one of the biggest challenges to fintech, second only to risk management, and 89 percent believe these regulations will continue to tighten." Agencies must decide whether to invest in business innovation or compliance while weighing the risks of security and privacy concerns.
Non-compliance
The cost of disregarding regulations may be far more expensive than innovation in the future. Companies will be subject to large fines and even prosecution once governing agencies catch up. Not only will it cost businesses money in penalties and legislation, the time spent to reconcile the damage will be detrimental to a company's growth.
And, a company's reputation is at stake when the public is made aware they are not meeting regulation measures. Clients would be hesitant to trust confidential information with a company that does not take security or privacy into consideration. Other financial institutions will be less likely to form a partnership, and investors will like to steer clear of any PR scandals.
Regulation SOC-1 & 2 can no longer be ignored. Many companies will inquire about this certification when partnering with any new vendors. SOC-1 addresses the controls an organization puts into place. SOC-2 addresses the effectiveness of those controls and the five trust principles: security, availability, processing integrity, confidentiality, and privacy.
Why Automation
FinTech companies should adhere to all regulations and governing agencies. The key players realize it is not in their best interest to ignore compliance. The challenges of compliance in the FinTech space can creep up on even the most innovative of tech companies. Security and privacy concerns are at an all-time high, and Automation may be the best solution. Automation can play a key part in the future of compliance procedures:
1. Remove human-error - Automation compliance procedures mitigate human error and help project managers. There will not be an overarching fear or anxiety on a human resource about accidental misreporting or missing a step.
2. Stay current on evolving regulations - The most current FinTech regulations will be built into a platform, assuring a company they are always addressing the most recent requirements.
3. Stay organized - Automating compliance organizes the messy process within a company, so no step falls through the cracks.
4. Be flexible - Automation can be customized to meet state and federal regulations, which is especially important for a FinTech company with a wide geographic footprint.
5. Save money and time- Automation will save executives time, money, and relationships by continuously and automatically meeting the most current regulations. Automation can avoid fines and PR ramifications caused by non-compliance.
About: NearShore Technology offers IT project development and team enhancement services to forward-thinking companies seeking the predictability and ROI of "nearshoring." More specifically, NearShore Technology delivers real business synergies and cost savings to Fortune 1000 companies looking to outsource IT processes in North America--NOT halfway around the world.
