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Fintech

Helping banks to manage fintech regulatory risk

Ashley Kovas

22 May 2018

Helping banks to manage fintech regulatory risk. Photography: Yuya Shino
Photography: Yuya Shino

As technology continues to revolutionize the banking world, how can firms ensure they reap the rewards but still manage fintech regulatory risk?


  1. New risks associated with fintech arise in a number of areas, including cross-border transactions and data privacy.
  2. Firms must be proactive in understanding the changing environment and be prepared to build on their everyday risk management.
  3. Thomson Reuters Regulatory Intelligence has the latest on how to manage fintech regulatory risk with confidence.

Banks around the globe are increasingly immersed in fintech.

They must do so in order to stay viable, as smaller, tech-savvy competitors eat into their customer base with innovative products and services. From payment services to crowdfunding, fintech is fast becoming a global phenomenon.

In Lithuania, banks provide a prime example of what is happening all over the world.

The country’s three million citizens have traditionally banked with a relatively small number of Scandinavian firms, whose offerings are now appearing somewhat limited in comparison to the innovations coming out of the fintech sector.

But, with 100+ fintech companies now established in the country, Lithuanian financial consumers are benefiting from far more choice.

Watch: Keeping up with regulatory change — TR London Risk and Compliance Summit 2018 with Ashley Kovas

For example, British company Revolut is already offering consumers options such as free international money transfers and fee-free global spending.

Paysera has expanded the playing field, providing low-priced, convenient payment services across multiple technologies.

As the number and scope of fintech firms increases significantly over the next few years, banks will need to look at how to respond — and that means becoming fintech firms themselves.

New risks in Fintech

Fintech is, at the very least, an evolution in the way banking will be done. Others would characterize it as a revolution.

Read the full Expert Talk “Understanding the Risks of Fintech”

Fintech risk awareness

Risk is an inevitable part of revolutionary change, and the risks associated with fintech are taking a variety of forms:

  • New risks: While fast transactions are one of the benefits consumers look to fintech for, firms must adapt their fraud and regulatory reporting processes to match that speed. Cross-border transactions, where identification relies on processes in another country, and rules on data privacy and money-laundering are also concerns.
  • Consumer risks: Consumers need better education on the correlation between risk and return.
  • Regulation: Regulatory scope is not keeping up with fintech developments in some areas while in others, existing regulations can impede development. The activities that trigger the need for authorization may need revision.
  • Bubbles: The dotcom bubble of the 1990s was an example of hope triumphing over experience. It is important to avoid investors being blinded by the shine of new technology.

Thomson Reuters Regulatory Intelligence

Navigate global regulatory compliance with Thomson Reuters Regulatory Intelligence

How to manage fintech regulatory risk

The fintech revolution is underway. Firms need to take some positive steps to make sure they are prepared for the changing business environment.

  • Understand the changing market: At board level, firms should consider how they are being affected by fintech, regardless of whether the technology is their own or belongs to their supplier or customer.
  • Build on everyday risk management: As the avalanche of future fintech developments occurs, successful firms will need to build on their existing risk management processes covering everything from necessary controls to risk identification, mitigation and monitoring.
  • Avoid bubble mentality: Savvy firms will steer clear of fintech hype.
  • Monitor compliance capacity. Firms will need to invest in fintech compliance expertise, either internally or via consultancies.
  • Contribute to the debate. Banks need to engage with regulators, pressing for change where it is necessary to protect the interests of their consumers, their business and fair competition.

When introduced correctly, fintech can improve the outcomes for consumers, even as it disrupts traditional business models. Banks that manage the risk inherent in this development will endure, those that fail to do so may not be so lucky.

Ensure your organization is up to date with the latest news on fintech and regulations with Thomson Reuters Regulatory Intelligence.

The single solution delivers a focused view of the global regulatory environment, empowering compliance professionals to make informed decisions to manage regulatory risk with confidence.

Thomson Reuters Regulatory Intelligence

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