Compliance as a Service and other ways to stay compliant

With the rise of fintech, financial services companies are rapidly bringing fresh products to market. However, in this vibrant environment, maintaining compliance is becoming increasingly complex as the scope of these regulations is broad and changes are frequent, increasing the risk of non-compliance and threatening sustainable growth.

Read on to learn more about how companies manage compliance burdens, keep up with regulatory changes, and ensure products don’t have compliance gaps.

The importance of compliance with credit and payment regulations

WITH card providers I’m releasing new ones credit cards Down fintech startups With groundbreaking innovations, organizations in the financial services sector face enormous compliance scrutiny. Regulatory obligations around payments, data privacy, capital requirements and more create a complex web that can be difficult to navigate.

Specific consequences that organizations may face as a result of non-compliance include:

• Costly fines and legal penalties: Regulatory bodies such as the CFPB, FDIC, and FTC often impose significant penalties on companies that fail to comply with regulations, which can amount to millions of dollars depending on the severity of the violations.

• Intensive audits and control: Compliance deficiencies may result in additional exhaustive reviews, on-site inspections and lengthy audits by regulators. Such control can inhibit operational dynamics and consume resources.

• Loss of key business partners: Verification by potential partners and suppliers takes into account regulatory compliance. If you find something missing, you may be rejected from important transactions growth.

• Thorough modernization of systems: In addition to financial penalties, restoring compliance of processes, controls and systems after the fact may involve costly consulting and technology upgrades.

• Higher risk of security breaches and fraud: Policy violations such as poor customer data protection make companies prime targets for hackers and fraudsters, causing potential legal, reputational and financial damage.

• Inability to proceed with funding events: Pre-IPO companies must demonstrate that they are compliant with regulations to instill investor confidence to advance through financing rounds and possible IPOs.

Compliance violations can even lead to project closure, resulting in financial losses, brand damage and a breach of customer trust. Getting back on track after setbacks can be an uphill battle.

Compliance as a key element of go-to-market strategy

Given the enormous risks involved, innovators in the financial services industry simply cannot afford to treat regulatory compliance as an afterthought, but must put compliance at the heart of their go-to-market plans from the outset.

Here are some of the key reasons why compliance deserves special consideration in planning:

• Avoiding crippling fines and legal action: Staying up to date with applicable laws and having systems in place to enforce them protects you from severe penalties.

• Building consumer trust and loyalty: Customers perceive financial compliance as a guarantee of security and credibility when choosing suppliers cardsloans, fintech tools and more.

• Preventing service disruptions: Strict compliance helps prevent self-imposed or regulator-enforced downtime, account restrictions, and other operational disruptions that frustrate users.

• Access to partnerships and financing: Potential partners and investors often look carefully at your compliance history. Failures can jeopardize important relationships and VC or IPO funding rounds.

• Fraud protection: The strict security and privacy protocols required by regulators also help protect companies from breaches and unauthorized transactions that turn into financial and legal problems.

Proactively addressing obligations such as credit or payment regulations at an early stage prevents costly mistakes that put businesses at risk. It also confirms your customers’ trust in the integrity of your offering and ensures a smoother experience.

Google has partnered with Marqeta to quickly launch and scale its popular Google Pay balance card. By taking on the complexities of card program compliance and regulatory compliance with Marqeta, Google was able to accelerate its time to market and experience exponential growth in customer, merchant, transaction, and partner integrations.

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How to ensure compliance?

Here are some best practices you can implement to help develop a strong compliance framework that mitigates regulatory risk and maintains customer confidence:

• Assign a dedicated team or compliance officer: Designate qualified staff to solely oversee daily compliance processes. Consider formally appointing a director, such as a chief compliance officer, to consolidate responsibility.

• Stay up to date with regulatory changes: Assign compliance staff to continually monitor announcements from key regulators to stay abreast of the latest guidance in areas such as payment regulation or credit regulation.

• Regularly review and interpret new laws and regulations:Schedule periodic reviews of existing and changed requirements. Assess the impact of regulatory changes on current policies, procedures, controls and compliance documentation. Please update these items accordingly to comply with the latest policies.

• Use technology to ensure compliance:Use purpose-built, automated compliance software tools to streamline monitoring, reporting and auditing. Incorporate artificial intelligence and machine learning into platforms to enhance surveillance capabilities. Automation increases the efficiency, consistency and comprehensiveness of compliance activities.

• Promote a culture of compliance:Ensure formal management communications and actions highlight compliance as a top priority. Encourage open communication at various levels regarding potential problems or shortcomings, without fear of retaliation.

• Keep detailed documentation: Maintain organized documentation of all compliance policies, controls, procedures, training programs and other protocols. Maintain accurate audit trails of transactions, data flows, submissions and other business activities. The documentation provides evidence of proper compliance with all audits.

• Engage in proactive communication with regulators: Routinely seek direct guidance from regulators on any unclear or gray areas around requirements. Respond quickly and comprehensively to regulatory inquiries, notifications, requests or audits.

Managing all aspects of compliance in-house can be costly, time-consuming and complex. A more effective option for dealing with regulations, such as payment regulations or credit regulations, is to work with compliance specialists.

By integrating Marqeta’s Know Your Business APIs, Torpago has found a simple way to ensure card program compliance and reduce fraud without burdening internal resources. Just a few months after implementation, with Marqeta automatically verifying identities and monitoring customers in the background, Torpago’s commercial card transaction volume increased 2.3 times.

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What is Compliance as a Service (CaaS)?

Compliance as a Service (CaaS) means using external specialists to handle extensive regulatory and financial requirements. It includes third party expertise, managed services and purpose-built software to check whether programs meet requirements such as PCI DSS, KYC, AML, Reg E and Reg Z.

CaaS is offered as a ready-made compliance infrastructure with ongoing support, as opposed to the task of building large internal teams that will be up to date with multi-faceted and constantly changing regulations. The promise is intended to enable companies to focus their energy on innovation and improving their core offering.

As regulation and monitoring become more complex, compliance as a service is expected to be increasingly offered in the coming years.

Collaborate with experts to improve compliance

Enforcing strict regulatory compliance poses enormous challenges, requiring constant legal interpretation, operational oversight and system control. This also requires the provision of a documentary trail and the ability to demonstrate the steps taken to meet the requirements.

This is where the value of a specialized partner like Marqeta becomes clear. As a payment processor with decades of experience in payments, Marqeta has built an advanced, end-to-end platform to enhance customers’ regulatory compliance capabilities.

Marqeta’s robust global compliance infrastructure and experienced team make it easy to launch compliant offerings.

Marqeta’s strengths are:

• Decades of legal expertise in meeting the requirements of sponsored banks and card schemes

• Reduce the compliance burden on your customers with a team of international compliance and legal experts

• KYC APIs to automate onboarding and reduce operational burdens

• Risk management tools and program management support

• Monitoring transactions for unusual activity to ensure compliance with regulations governing payment instruments and the flow of money

Find out how Marqeta’s compliance expertise can help you accelerate your time to market. Learn more