Comply or Die: How compliance audits can help paytechs survive

Comply or Die: How compliance audits can help paytechs survive
By James Borley

With new rules and regulations being introduced, Heads of Compliance in the payments sector are now under major pressure to ensure their processes and procedures are up to date, adequate and compliant.

Those attempting to outplay this line of regulation risk substantial regulatory penalties, along with severe reputational damage, that could result in a detrimental, even terminal, decline in business.

The focus on compliance has been particularly felt within the payments sector, accompanied by increased complexities and demands arising from PSD2 in particular.

In this heavily scrutinised industry, the reality is that most businesses may not be here today but for effective compliance auditing. Here are three main reasons why:

Banking Partnerships – not all banks want to steer away from payment firms. Often though, the firm, or the people behind it, have no track record upon which the bank can rely or take comfort. Banks may look to an external review or audit as a means of assurance that the firm is up to muster, and an acceptable risk as a customer.

FCA Approval – compliance audits are not required to be submitted to the FCA as part of an application for authorisation. The FCA will look at the information provided by the firm itself, rather than the content of any audit report. However, a pre-application ‘audit’ may identify to the firm any risks or issues that might be picked up by the FCA as part of its assessment, allowing them to address these before submission of the application.

Investment Investors are always looking for the potential for a return on their investment but, at the very least, that they don’t lose money. Without external investment, the business is likely to wither and die; the compliance audit may yet provide that vital additional assurance to a potential investor.