Now encapsulating a focus on societal impact and the environment, the term ‘fintech for good’ has evolved from its initial meaning of charity. But it doesn’t stop there. This July, we are on the hunt to find out how the fintech industry is doing ‘good’ for local communities and the world, revealing current and future plans to make change.
Bringing a close to our monthly ‘fintech for good’ theme and our focus on impact platforms, we finally take a look at regulatory hurdles faced by the fintechs looking to make a positive difference.
While many organisations are successfully solving genuine issues, regulators are as keenly focused on these firms as those out to maximise profits.
Julie Cunningham, founder and CEO of Portend
As Julie Cunningham, founder and CEO of due diligence platform Portend, explains: “Fintech impact platforms often grapple with complex regulatory landscapes.
“Issues such as data privacy, cross-border transactions, and adherence to stringent anti-money laundering (AML) protocols require constant vigilance and adaptation. Collaborative efforts between industry leaders and regulators are essential to streamline compliance processes without stifling innovation.”
With this in mind, we hear from industry experts to find out about the biggest challenges facing impact platforms and how they can overcome these hurdles.
The importance of remaining agile
Peter Wood, CTO at Spectrum Search
“Regulatory and compliance challenges are significant hurdles for impact platforms. Navigating the complex landscape of financial regulations across different jurisdictions can be daunting,” explains Peter Wood, chief technical officer at Spectrum Search.
“Platforms must comply with AML and know-your-customer regulations to prevent illicit activities. The evolving nature of fintech regulations requires platforms to be agile, constantly updating their compliance strategies to align with new laws and guidelines.
“There is also the challenge of ensuring data privacy and security, adhering to regulations such as GDPR. Balancing regulatory compliance with innovation is critical to maintaining the trust of users and regulators alike.”
Staying vigilant
Daniel Grunstein, co-founder and CEO of Crowded Banking, also explains the dangers that this space poses for nonprofits. In the US, he warns that firms could be caught out by new regulations regarding raising funds.
Daniel Grunstein, CEO and co-founder at Crowded Banking
“Fintech impact platforms can get unfairly caught up in the BaaS regulatory drama of the past year. With the OCC consent orders against BaaS banks and bad press plaguing B2C BaaS platforms, regulators are extra scrutinising when it comes to all types of BaaS platforms, catching those in the middle that are B2B or Business to Nonprofit. These platforms generally work with established businesses/organisations, where fraud is much easier to detect given the clear role designations of personnel and transactional predictability.
“It’s trendy at the moment for nonprofits to raise funds, and collect payments and dues on P2P payment apps like Venmo, Zelle, PayPal etc. But I’m not so sure that these organisations are fully aware of the IRS regulations that have already begun to come into effect about additional reporting requirements for collecting over only $600 on these apps.
“Not to mention, that fraud thrives on these P2P payment apps, creating a compliance headache for impact platforms. Anyone can open an account and name it whatever they want. There have been cases where people set up accounts with the name and logo of a charity and people donate there by accident. And worst of all, these platforms aren’t obligated to pay you back!”
‘Engage with regulators’
Finally, Robin Yan, CEO of Fana, dubbed ‘the card that gives back’, explains the various regulatory risks that firms could come face-to-face with, and offers some important advice.
Robin Yan, CEO and co-founder of Fana
“As of 2023, fintech platforms face increased regulatory scrutiny and new regulations aimed at enhancing transparency, security, and consumer protection.
“Adhering to stringent data protection laws is a primary challenge. With growing reliance on big data and AI, ensuring customer information privacy and security is crucial. Regulatory bodies focus on data collection, storage, and processing, pushing companies to invest heavily in cybersecurity measures.
“Compliance with AML and combating the financing of terrorism regulations is also critical. Fintechs, especially in payments and remittances, must implement systems to monitor and report suspicious activities. This requires technological investments and ongoing staff training to stay updated with regulatory changes.
“The regulatory landscape is becoming more demanding as authorities address emerging technologies like blockchain and cryptocurrencies, posing unique regulatory challenges. Operating across multiple jurisdictions adds complexity, as fintechs must comply with diverse financial regulations, often necessitating localised strategies.
“To thrive, fintech platforms must engage with regulators, participate in policy discussions, and adapt to the evolving regulatory environment. This proactive approach helps mitigate risks, build consumer and stakeholder trust, and enhance market position.”
The post What Regulatory and Compliance Issues Face Impact Platforms? appeared first on The Fintech Times.
