Though back office-oriented fintechs may deal with fewer regulatory concerns than consumer-facing fintechs do, they still confront a slew of geography-specific processes and rules. From filing requirements to international sanctions, regulations shape these fintechs’ structure and scope, and can determine what geographies they spread to over time.

Standardization

The most apparent regulatory processes affecting back offices are the local and national compliance requirements and the infrastructure governing these processes. Research by Deloitte suggests “data handling and enterprise financial systems… and in some cases, a third-party system with local capabilities” are required to integrate effectively with government-related processes.

For back-office fintechs, this means the potential need for new partnerships when expanding into new states or territories.

Privacy and automation

In the right compliance framework, back office-oriented fintechs have the potential to cross-pollinate anonymized data and generate sector-wide insights for clients. Aggregate effects of geopolitical crises, for example, or of supply-chain hiccups. But to leverage this data as a source of intelligence requires both client consent as well as regulatory approval.

The opportunity for that kind of product offering seems particularly slim in regulatory landscapes like the EU, where GDPR requirements mandate the siloing of data stacks. With sufficient business and platform advocacy, however, and with demonstrated use cases that have measurable positive social impacts, fintechs and regulators can move the needle to create infrastructural workarounds that are both privacy-focused and less segmented.

Cross-border compliance

Fintechs entering a new territory confront an entirely new matrix of compliance requirements and processes. Particular employment laws, for example, or taxation schemes. That overhead explains why back-office automating fintechs are committed to domestic expansion, with acquiring international clients being a (very) long-term goal.

Cross-border payments in particular—whether for supply-chain reasons, contractors, or some other business need—come with an alphabet soup of regulators and oversight. OFAC, for instance, ensures that international payments meet sanctions guidelines, and can impose heavy fines for violations. Back-office fintechs, especially those with internationally oriented clients, have built out their compliance teams in correspondence with the complexity of the operations they help automate.