# Security and compliance must be top priorities to avoid fintech failure Author: Pal Sinha, Barnali Author URL: https://financedigest.com/author/pal-sinha-barnali Published: 2018-03-26 Category: FINANCE Category URL: https://financedigest.com/category/finance Meta Title: Why Compliance and Security are Essential in Fintech Development Meta Description: Learn from Phil Bindley, Managing Director at The Bunker, why compliance and security are essential for successful products in the financial services industry. URL: https://financedigest.com/security-and-compliance-must-be-top-priorities-to-avoid-fintech-failurehtml ![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/fd260318-3-1736842894426-compressed.jpg) ![Phil Bindley](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/phil-bindley-1736842894393-compressed.jpg) Phil Bindley _Phil Bindley, Managing Director at The Bunker, explains why early stage Fintech businesses must focus on compliance and security throughout their develop, if they are to create successful, profitable products._ The [financial](https://www.financedigest.com/financial-literacy-what-is-financial-literacy-and-why-is-it-important.html) services industry features a complex ecosystem of large institutions, smaller supporting businesses and boutique organisations that are all governed by strict and intricate regulations and legislation. These organisations face a significant obstacle to remain in [compliance with these regulations](https://www.financedigest.com/are-compliance-and-anti-money-laundering-aml-regulations-hurting-your-sales.html "Are compliance and anti-money laundering (AML) regulations hurting your sales?"), and those that violate them may find that they receive significant penalties from regulators who, following the financial crash of 2008, are keen to reinforce good conduct within the industry. It is therefore critical that any business operating within the financial [services industry](https://www.financedigest.com/hybrid-working-a-risk-or-opportunity-for-the-financial-services-industry-2.html "Hybrid working: a risk or opportunity for the financial services industry?") prioritises compliance, making it a fundamental part of business operations and product development. In recent years the [financial](https://www.financedigest.com/financial-literacy-what-is-financial-literacy-and-why-is-it-important.html) [services industry has been increasingly subject to disruption from innovative](https://www.financedigest.com/balancing-innovation-and-security-within-the-financial-services-industry.html "Balancing innovation and security within the financial services industry") [Fintech](https://www.financedigest.com/financial-technology-fintech-how-to-navigate-the-latest-trends-and-innovations.html) businesses, with developers creating innovative products and services that can offer financial institutions a ream of benefits. Better customer service, more efficient [delivery of services](https://www.financedigest.com/online-food-delivery-services-market-will-reach-a-valuation-of-over-us-4212-6-mn-towards-2029-end-fmi.html "Online Food Delivery Services Market will Reach a Valuation of over US$ 4,212.6 Mn towards 2029-end: FMI") and an expansion of product portfolios are just some of the advantages that financial institutions, which have traditionally been reluctant to embrace innovation, can expect to achieve from the [Fintech](https://www.financedigest.com/financial-technology-fintech-how-to-navigate-the-latest-trends-and-innovations.html) revolution. However, [Fintech faces a challenge](https://www.financedigest.com/how-to-overcome-the-current-challenges-facing-your-fintech-business.html "How to overcome the current challenges facing your fintech business") in that many of the best ideas come from people with a background in application development rather than in financial services. The result is that great [product design](https://www.financedigest.com/product-design-verification-and-validation-solution-market-2021-present-scenario-and-growth-prospects-2025.html "Product Design Verification And Validation Solution Market 2021 | Present Scenario and Growth Prospects 2025") is often prioritised over compliance. A greater awareness of the [financial](https://www.financedigest.com/financial-literacy-what-is-financial-literacy-and-why-is-it-important.html) regulations from the very beginning can help to avoid [issues](https://www.financedigest.com/9-issues-in-corporate-finance-and-strategies-to-overcome-them.html "9 Issues in Corporate Finance and Strategies to Overcome Them") before they ever materialise. Financial institutions handle vast quantities of money from market [trading](https://www.financedigest.com/trade-finance-the-small-brush-to-paint-the-big-picture.html "Trade Finance: The Small Brush to Paint the Big Picture"), pension funds, personal deposits and other forms of capital. It is critical that these vital financial assets can transition through the financial with absolute security. Large financial organisations cannot take the risk of putting the resources and assets of their clients and customers into the [hands of a service provider that may not be entirely secure and compliant with the relevant regulations](https://www.financedigest.com/german-regulator-hands-ey-2-year-audit-ban-over-wirecard-scandal-handelsblatt.html "German regulator hands EY 2-year audit ban over Wirecard scandal – Handelsblatt"). Early stage Fintech businesses [must therefore prioritise](https://www.financedigest.com/why-the-finance-sector-must-prioritise-mobile-security-over-innovation.html "Why the finance sector must prioritise mobile security over innovation") compliance throughout the Software Development Lifecycle. Any platform that operates within the ecosystem of large financial institutions must feature the highest levels of compliance, so for an early stage Fintech business to stand a chance of launching a successful product and it being adopted within the [finance industry](https://www.financedigest.com/how-to-drive-a-data-culture-in-the-finance-industry.html "How to drive a data culture in the finance industry"), it must focus on compliance. Many early stage Fintech businesses understandably focus their efforts on creating the ultimate customer experience for their products, or developing a full suite of [services to make their product as competitive](https://www.financedigest.com/uk-says-baker-hughes-altus-deal-may-hurt-competition-in-oil-well-services.html "UK says Baker Hughes-Altus deal may hurt competition in oil well services") as possible. In many cases compliance is an after-thought, with developers forced to try to adjust their [product after it has been completed to make it compliant with the relevant regulations](https://www.financedigest.com/u-s-markets-regulator-takes-aim-at-coinbase-lending-product.html "U.S. markets regulator takes aim at Coinbase lending product"). This can cause a very costly [delay in the development of the product](https://www.financedigest.com/panasonic-delays-production-of-new-tesla-battery-to-improve-performance.html "Panasonic delays production of new Tesla battery to improve performance") and, in some cases, it may even result in the product having to be completely rebuilt. This is not only incredibly damaging for the developers, but also for their investors, who [risk diminishing returns if the Fintech](https://www.financedigest.com/brexit-the-risks-to-the-city-and-fintech-have-never-been-greater.html "BREXIT: THE RISKS TO THE CITY AND FINTECH HAVE NEVER BEEN GREATER") businesses they put their money into do not deliver a successful product on time. Developers need to be aware of the wide variety of regulations that they need to abide by. The highly-regulated financial services sector features several significant regulatory hurdles – such as the European Union’s Revised Payment Services Directive (PSD2), which will force banks to open their data and infrastructure to third party developers, and the Payment Services Regulation 2009, which places strict conditions on any business operating within the payment [industry](https://www.financedigest.com/end-of-year-overview-of-the-payments-industry.html "End of year overview of the payments industry") to ensure maximum consumer protection and establishes the maximum processing times for payments in the euro and other EU currencies. Prioritising their compliance with these regulations can give ultimately give early stage Fintech businesses a head start in [launching their product on the market](https://www.financedigest.com/new-product-launches-to-put-the-marker-pens-market-in-a-good-stead.html "New Product Launches To Put The Marker Pens Market In A Good Stead"). Data centres that not only guarantee UK data sovereignty but conform to the most demanding industry standards play a critical role in helping Fintechs to comply with the financial [services sector’s](https://www.financedigest.com/the-state-of-cybersecurity-in-todays-financial-services-sector.html "The state of cybersecurity in today’s financial services sector") strict regulations. Navigating the compliance landscape can be particularly challenging as many Fintech businesses, while heavy in technology innovation can benefit massively from service providers that are experienced in delivering technology and [cyber security](https://www.financedigest.com/how-to-handle-cyber-security-during-mergers-and-acquisitions.html "How to Handle Cyber Security during Mergers and Acquisitions") services in the financial services sector. That is why it is crucial that Fintechsform [partnerships with providers who can offer](https://www.financedigest.com/u-s-says-it-has-agreed-pacific-islands-partnership-offering-big-dollar-aid.html "U.S. says it has agreed Pacific Islands partnership, offering ‘big dollar’ aid") the relevant experience and expertise to help them overcome these potential obstacles. It is also not just about financial regulatory compliance but also about data security, ensuring the overlap between compliance and security remains the most important facet of a [business’s development](https://www.financedigest.com/dan-hodgson-joins-verasity-as-director-of-business-development.html "Dan Hodgson joins Verasity as Director of Business Development") life cycle. [Security is a fundamental part of compliance](https://www.financedigest.com/managing-compliance-complexity-will-deliver-security-rewards.html "Managing compliance complexity will deliver security rewards"). Fintech platforms are playing increasingly important roles in financial organisations’ operations, and any breach in [security could be catastrophic for businesses and individuals throughout](https://www.financedigest.com/a-culture-of-cyber-security-throughout-financial-services-organisations.html "A Culture of Cyber Security Throughout Financial Services Organisations") the financial sector and beyond. It is therefore crucial that every early stage Fintech [business make security](https://www.financedigest.com/no-collateral-no-problem-here-is-what-you-need-to-know-to-secure-a-business-loan.html "No Collateral, No Problem: Here is What You Need to Know to Secure a Business Loan") a priority, as part of their approach to compliance. Any financial institution considering adopting a [fintech product](https://www.financedigest.com/why-make-fintech-products-accessible-for-all.html "Why Make Fintech Products Accessible For All?") will, first and foremost, consider the security of that product. Early stage Fintech businesses that prioritise security will stand a much better chance of delivering a successful product and building their [market share](https://www.financedigest.com/skull-deformity-implants-market-share-top-operating-players-recent-enhancements-and-regional-analysis-2028.html "Skull Deformity Implants Market Share, Top Operating Players, Recent Enhancements and Regional Analysis 2028"). Regular assessment of both security and compliance, throughout the Software Development Lifecycle, is critical to helping early stage Fintech businesses experience [smooth growth as they on-board new customers or receive additional funding](https://www.financedigest.com/oiling-the-wheels-for-a-smooth-funding-cycle.html "OILING THE WHEELS FOR A SMOOTH FUNDING CYCLE"). Being able to say that you’re [confidently in control of your business’s compliance and security speaks volumes for any potential customers](https://www.financedigest.com/instilling-customer-confidence-in-the-pandemic-era.html "Instilling customer confidence in the pandemic era"). If data management processes are compliant with the relevant regulations and legislation, hosted on a dedicated, ultra-secure, managed infrastructure, the [risk of business failure due to regulatory](https://www.financedigest.com/analysis-rbc-tightens-grip-at-home-with-10-billion-hsbc-canada-bid-regulatory-risks-loom.html "Analysis-RBC tightens grip at home with billion HSBC Canada bid, regulatory risks loom") and compliance issues is dramatically reduced. --- This blog is powered by Superblog. Visit https://superblog.ai to know more. ---