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The fintech industry finds itself under the watchful eye of regulatory agencies. The industry experienced a 26 percent increase in enforcement actions in one quarter alone. Regulatory agencies like the Consumer Finance Protection Bureau, the Federal Reserve System, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency have issued specific guidance, aiming to close the gap between fintechs and traditional financial services entities.

Oversight leads to opportunity

Viewed through another lens, increased regulation is a sign that fintech is maturing. If you’re an established fintech, then oversight can be a good move. It defines a level playing field for everyone and helps keep out the troublemakers.

Finding success with banks

There are several steps to consider that would help ensure success while working with banks, including:

• Focus on compliance – If your fintech complies with in-scope regulations, you’re doing business the right way and lowering the risk of being singled out by a regulator.
• Clearly define roles and deliverables – A contractual agreement between the fintech and the bank is a must. Follow the bank’s procedures or leading practices for onboarding vendors.
• Be regulatory ready – Be proactive and consider engaging an outside firm to conduct a self-assessment and address any of their findings. This advanced step can lessen the number of findings by the official audit.

Fintech regulation is a sign of industry maturity and levels the playing field. Fintechs have a big opportunity in payments and embedded finance. However, working with banks comes with risks amid a complex regulatory landscape. Read our latest fintech article to learn more.