Why fintechs and neobanks can build and grow up to 8x faster in 2022
Fintechs and neobanks have had a love-hate relationship with compliance for years.
On the one hand, financial institutions understand that anti-money laundering monitoring and other compliance procedures are necessary aspects of conducting business. However, the necessity of these procedures creates some friction.
One of the main reasons for this is that fintech compliance infrastructure has typically taken a long time and a lot of money to implement for companies.
Founders and product teams, on the other hand, have long feared that compliance checks will restrict user experience and growth.
This article explains why fintechs and neobanks can now adopt risk assessment and transaction monitoring tools up to 8 times faster and for less money than they could previously. While keeping an eye on risks in a way that supports user and revenue development.
Here’s what we’ll cover:
- Why The Status Quo Didn’t Work For Fintechs & Neobanks
- Why Fintech Compliance Just Got 8x Faster
- How To Get AML Compliant Without Killing Cash Flow
- AML Compliance vs Growth: Why Fintechs No Longer Need To Compromise
Why The Status Quo Didn’t Work For Fintechs & Neobanks
Fintechs and neobanks have traditionally faced two options when it comes to building an effective compliance infrastructure.
Choice A - develop an in-house solution. But unfortunately, this has a number of downsides for fintechs and neobanks.
First, developing your compliance infrastructure takes several months and comes with serious extra personnel costs. For example, year-round maintenance will likely require a 3-4 person team. Which could easily lead to extra costs of 200-300k per year on average.
Another issue with developing in-house is that it saps resources from your business’s core service offering.
The result is a lot of time, money, and energy being spent on compliance features that most users hardly notice. Rather than features that deliver visible value and drive user growth.
Choice B - outsourcing the compliance infrastructure - seems to be the more attractive option. But unfortunately, the majority of services are not made or priced with fintechs & neobanks in mind.
Firstly, most fintech compliance solutions come with huge upfront fees. As well as integration timelines that can stretch to 2-4 months on average. Neither of which fit the ‘fail fast’ motto.
As a result, it’s clear that neither option fits the budget or lean mindset of fintechs and neobanks. So why has this now changed?
Why Fintech Compliance Just Got 8x Faster
It’s clear that the old way of building a fintech compliance infrastructure didn’t work for fast-moving and budget-constrained businesses.
This is why Flagright’s off-the-shelf transaction monitoring platform is such a game-changer for fintech innovators.
First of all, Flagright’s solution reduces integration time by 70%. This is down to the fact that Flagright’s AML API is standardized and easy to implement. With modules that come pre-configured for your business and use-cases.
Flagright is API-driven, thus after the quick integration, no extra code is required. As a result, fintechs and neobanks can move from zero to fully monitored in as little as 4 working days. In comparison to other outsourcing or in-house development choices, we can deliver a 400 - 900% return on investment.
This is a huge leap forward from the 2-4 month timeline accepted in the industry. But the benefits of no-code solutions like Flagright don’t stop there.
Get AML Compliant Without Killing Your Cash Flow
Flagright's solution is priced for fintechs and neobanks, unlike other compliance infrastructures.
Instead of imposing large upfront expenses on businesses, Flagright has opted for a clear pay-as-you-go strategy.
Fintechs and neobanks can use this to enhance their cash flow and pay for the benefits of good AML procedures as they use them. Instead of wasting money while their compliance infrastructure is being built or integrated, they should save it.
As a result, Flagright enables companies to build a stronger AML compliance infrastructure more quickly, effectively, and affordably than ever before.
Fintech Compliance vs Growth: Why You No Longer Need To Compromise
So far, we've discovered how Flagright overcomes three big AML compliance roadblocks: time, money, and assembling the right team.
But how can you make sure your AML compliance solution doesn't come in the way of your business's expansion?
Fintechs and neobanks have long been concerned about the possible conflict between regulatory requirements and revenue development.
This stems from two major sources:
- The potential impact of compliance checks on user experience and turnover.
- The potential for good transactions to be blocked as “collateral damage”
Let’s start with the potential impact of user experience.
After all, we live in a world where users expect instant feedback and near-instant transactions. This means a few extra seconds of compliance processing can put your fintech app at a huge disadvantage.
For fintechs and neobanks, the problem isn’t that near-instant solutions aren’t available. The problem is they are traditionally very expensive and time-consuming to implement. Even if they are outsourced.
Flagright’s no-code and real-time monitoring API solves this problem. As it allows businesses to provide faster checks and smoother experiences for their users. Without the huge investment of time and money before launch.
So that’s the user experience covered. But what about making sure your checks don't block growth altogether?
How To Balance Fintech Compliance and Growth
As you saw earlier, fintechs and neobanks are often concerned that compliance checks will act as a weight on growth. Especially in the case that compliance could mistakenly block ‘good’ transactions and users.
At this point, it’s good to know that static and dynamic risk-scoring models have different risk profiles in the area. And in the case of solutions that use static risk scoring, this may come with the added risk of blocking good transactions.
Here’s a quick run-down on the difference between static and dynamic monitoring:
- Static risk-scoring uses a “one and done” approach to risk profiling. Based on a rigid risk profile made of factors like location, age, etc.
- On the other hand, dynamic risk scoring like Flagright's, uses a time-series algorithm that accounts for and adapts to a user’s behavior over time. While still taking into consideration the user’s initial risk profile.
This turns your compliance infrastructure into an enabler of healthy transactions and revenue that other monitoring services may have blocked. While at the same time being more responsive to new threats and risks as they evolve.
As an added bonus, Flagright’s compliance platform lets you dial your risk appetite up or down with one click.
This gives you the freedom to balance growth with full compliance and safety. Because in the world of no-code compliance, you don’t have to sacrifice one for the other.
Conclusion: Towards Faster And Healthier Growth For Fintechs and Neobanks
As we've seen in this article, having a good compliance solution in place makes it significantly easier for fintechs and neobanks to build and grow.
This is because Flagright's no-code solution was designed with fintechs and neobanks in mind. Not simply in terms of the significantly lower initial investment. But in how quickly you can get up and running and concentrate on growth.
Contact us here to learn more about Flagright's AML compliance platform.