Despite the growing list of rules imposed on financial and fintech companies by the global regulators, far too many teams still treat compliance as an afterthought. For a lot of startups out there, compliance is something you tack on at the last minute, hoping that it will be enough. The problem is, that approach doesn’t work at scale — and eventually, it harms you rather than helps
3 Tips to Improve Fintech Compliance
- Treat compliance as a part of the core product architecture from the start.
- Integrate compliance officers with the product and engineering teams.
- Develop a modular compliance architecture.
Reports show that in 2024 alone, regulators handed out more than $4.6 billion in enforcement actions against financial institutions. And big banks were hardly the only ones that got hit. Fintech startups today are expanding faster than ever, and every jurisdiction has its own maze of rules to navigate. If your compliance setup is a patchwork of quick fixes, you likely won’t get far before running into trouble.
So how does a company go about fixing that? This is what I want to cover in this article. With the right mindset, compliance can stop being a roadblock and start helping you instead.
Don’t Treat Compliance as a Needless Chore
The very first big misconception to correct is that compliance is simply a box to be checked. Too many fintech teams still see it as a regulatory chore, separate from product or engineering. But as a result of such thinking, they often make things harder for themselves.
The reality is that compliance runs across every function of a financial product, from how you onboard users to how you monitor transactions. Treating it as something to bolt on later is like trying to build the foundation of a house after you’ve already moved in. Clunky onboarding flows, siloed KYC vendors, teams drowning in false positives — all these and more are consequences of not giving compliance its due importance.
A smarter approach is to think of it as part of the core architecture from day one. That doesn’t mean you need to spend enormous sums to build the best system on the market. It simply means that you need to consider compliance issues within your product design, not apart from it.
The Cost of Getting It Wrong
Previous research showed that banks and fintechs worldwide spend roughly $206 billion a year on financial crime compliance. For some firms, compliance eats up as much as 19 percent of annual revenue. And as regulations themselves grow stricter, these costs keep growing year-over-year.
And we are not just talking about the visible costs here. Hiring bigger compliance teams, paying fines, investing in new software — all of that gets plenty of focus, yes. But the hidden costs are just as bad, if not worse.
Far too many teams are still stuck in old-style manual processes, endless spreadsheets, and fragmented systems that slow everything down. Analysts burn themselves out chasing false positives, while quite possibly missing the real risks. And when customers grow frustrated because their legitimate transactions got flagged, your reputation also takes a hit.
Simply put, the current system is expensive, inefficient and unsustainable — not to mention, bad at keeping you out of trouble.
What Teams Miss by Siloing Compliance
A big part of the problem comes down to the fact that compliance departments often work in isolation from the rest of the company. When product and engineering teams aren’t in regular contact with legal, it leads to policies that can make perfect sense on paper but grind the business to a halt in practice.
Take onboarding, for example. If compliance requirements aren’t aligned with product design, you risk chasing customers away in the middle of the sign-up process. Every extra click, delay, or form to fill out means more users will become frustrated and abandon the app before they even open an account. This is a prime example of how a compliance issue can also be a major business problem.
That’s why building proper rails between your departments is crucial. Compliance officers need to understand business metrics like client acquisition and revenue impact. Product managers need to grasp regulatory constraints. Engineers need to know why certain data needs to be logged or flagged.
When you are aware of this, you can start building these rails early on, turning compliance from an obstacle into a strategic asset. As a result, your company gets to scale faster and more efficiently.
You Need Smarter Architecture, Not Just More Tools
Another mistake is assuming that the solution to your compliance problems is to simply upgrade the tools you use. Yes, technology matters — the growing trend of automation and using AI, in particular, can greatly reduce manual bottlenecks.
As an example of this, HSBC previously shared that switching to AI-powered monitoring enabled it to spot two to four times more suspicious incidents. And at the same time, the team was able to cut false positives by 60 percent. That’s a considerable and noteworthy improvement.
But technology alone isn’t enough. If your compliance stack is a collection of disconnected vendors, you’re still stuck with inefficient workflows and human ETL pipelines. Your analysts spend more time juggling data between systems than they do actually making decisions that push operational processes forward.
The real fix here is developing a modular compliance architecture. Simply put, this means building a system where KYC, transaction monitoring and reporting are all connected within the same framework.
Instead of a compliance officer pulling a customer profile from one tool, a sanctions result from another, and transaction data from yet another, a modular system can collect all relevant information in one place. The result? Faster investigations, fewer errors, and a lot less frustration for your people.
At the same time, you also need to leave room in that system to adapt to new jurisdictions as your business scales. If your compliance setup is too rigid, every time you enter a new market, you’ll have to rebuild things from scratch. It doesn’t need saying that this is a highly painful and time-consuming process.
A modular design, on the other hand, lets you slot in new rule sets to meet local requirements without needing to overhaul the entire system. This kind of flexibility makes scaling across markets not just possible, but actually sustainable.
Turn Compliance Into a Competitive Edge
Compliance doesn’t have to slow you down. In fact, when done right, it can be the very thing that sets you apart in the right way.
Customers naturally trust companies that protect their data and move money safely. And regulators respect businesses that build thoughtful systems that can adapt to their rules without too much hassle on either side.
In today’s environment, compliance isn’t just about avoiding fines. It’s about building a business that can scale without constantly tripping over legal hurdles. Learning how to do it is what will allow your company to last.
