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Is Compliance the New Key to Disruptive Tech?

June 03, 2024

  • AML Compliance
  • Audits
  • B2B SMEs

Sadra Hosseini, CEO at Ryft
Sadra Hosseini, CEO at Ryft

By Sadra Hosseini, CEO at Ryft

We’ve all heard about the “move fast, break things” mentality, which became synonymous with companies like Facebook, Uber, and WeWork during the past decade. Throughout this period, forward-thinking companies regularly built products with little to no care for existing regulations, guided by the belief that regulators would eventually be forced to catch up with them when push came to shove.

For the most part, many of these companies were ultimately proven right. The consensus at the time was that innovation leads and regulation follows. However, fast forward to 2024 and things are beginning to change. Across the board, there is now far less tolerance for innovations that outpace regulations, and much greater emphasis placed on the importance of ensuring compliance from the outset of a business.

How We Got Here

It’s probably fair to say that the tech sector has itself somewhat to blame for this predicament. While most of the technological and digital innovations of the past decade generated improvements across people’s lives, a small minority opened the door for more nefarious activities. Whether it’s increased rates of fraud or money laundering, it’s clear to see why regulators have felt compelled to act.

For startup businesses, this recalibration has necessitated a change in attitude and thinking. It’s now essential to prioritize regulatory compliance from the outset when building products. Even established companies, such as those across the Banking-as-a-Service space, are being challenged to update solutions in line with new and enhanced regulations designed to better protect customers and ensure market stability.

Evolving to Change

This is a daunting ask for many. As a startup founder myself, I appreciate the natural urge to resist the constraints of regulations when building solutions. It’s long been perceived that the necessity to adhere to regulations can deter the rapid development and deployment of new products and services. These constraints are seen as hindrances to the creation of truly transformative technologies capable of disrupting established markets.

However, as the fintech sector continues to mature, those of us involved must act accordingly. We find ourselves in a new period of progress, and the demands of the day dictate much greater emphasis on compliance. Accepting and understanding that fact can be a huge strategic advantage to businesses. Particularly for startups, baking compliance in at an early stage of development is now a huge differentiator.

Compliance is Cool

By embedding compliance into their core strategies, startups can mitigate legal risks and create more sustainable growth pathways. This proactive approach not only helps in avoiding fines and sanctions but also positions these companies as responsible and reliable players in their respective industries, helping to underline their long-term commitment and vision to the space they operate in.

What’s more, demonstrating a commitment to compliance can enhance credibility with investors, who are increasingly wary of legal and regulatory risks. It can also be a huge positive for customers, who are becoming increasingly aware of the risks of non-compliance in areas like finance and technology where data privacy, security, and fraud prevention are paramount concerns.

Steps for Success

With a few simple steps, startups can balance innovation with compliance and ensure they’re still capable of delivering game-changing products. Developing a roadmap of relevant regulations and standards that apply to the product is a great start and can help to identify potential legal obstacles early on to ensure that your product design aligns with any relevant regulatory requirements.

Regular audits and updates to compliance protocols are also important here, as are regular training sessions for employees to keep them informed about compliance requirements and the importance of adhering to them. Likewise, look to allocate resources specifically for compliance regardless of company size and consider adopting dedicated compliance tools and management systems to streamline the process.

Building a Culture of Compliance

Finally, look to maintain an open line of communication with regulatory bodies. This can help in developing an understanding around their expectations and provide insights into upcoming regulatory changes. In addition, developing the habit of open dialogue around compliance keeps it at the forefront of your staff’s mind and creates a culture where compliance is seen as an active concern and far less likely to catch you on the back foot.

By making these small alterations, startup businesses can still balance innovation with compliance, creating transformative products that not only challenge established monopolies but also stand the test of regulatory scrutiny. While rapid innovation has been the hallmark of many successful startups, new compliance demands necessitate a more nuanced approach. With the right approach, startup founders can ensure they’re responding accordingly.

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