target audience: TECH BUYER Publication date: Jun 2023 - Document type: IDC Perspective - Doc Document number: # US50758823
Fintechs and Regulatory Compliance
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Abstract
This IDC Perspective discusses how financial technology (fintech) companies and banks that provide those companies with bank accounts will continue to struggle to meet the expectations of U.S. regulators provided that there may be insufficient information supplied by the fintechs to the banks to conduct activities that are required per regulations.
In addition to structuring the contractual requirements between fintechs and their banks to require the collection and use of customer and transactional data required to meet U.S. regulatory requirements, it will be necessary to determine what technological solutions may be needed to complete know-your-customer (KYC), sanctions screening, and transaction monitoring actions required by U.S. regulators. If the solutions adopted by fintechs and their banks include the storage and transmission of customer and transactional data, which seems likely in many cases, then additional concerns arise regarding data privacy and information security that will also need to be addressed. Although both banks and fintech companies have concerns about the incremental costs and effort associated with regulatory compliance, it is vitally important to make some challenging decisions about how best to take the actions necessary to comply with U.S. regulatory requirements.
"Banks and their fintech customers will need to collaborate and consider technological solutions needed to help meet the bank's regulatory expectations with respect to AML, including KYC and transaction monitoring, and sanctions screening" — Sean O'Malley, research director, IDC Financial Insights: Worldwide Compliance, Fraud and Risk Analytics Strategies