In 2024, the global average cost of a data breach hits an all-time high of $4.88 million, a 10% increase from the last year and the highest total ever. Interestingly, almost half (46%) of all the breaches had customer personally identifiable information (PII) such as tax identification numbers, emails, phone numbers, and home addresses. This highlights the substantial financial and reputational risks associated with poor security and compliance practices.
Compliance in fintech is not merely a matter of staying out of trouble; it’s about establishing a foundation of trust with users, regulators, and investors. For product teams and developers creating financial apps in the U.S., compliance needs to be a part of the development process, not an afterthought.
Ignoring compliance upfront inevitably results in expensive and time-consuming rework, possible reputational harm, and even legal consequences. This fintech compliance checklist provides a systematic approach to incorporating compliance into your applications from day one, enabling you to develop secure and reliable products.
Understanding the U.S regulatory landscape
The United States’ system for regulating Fintech is complicated and multifaceted, mirroring its broader financial regulatory structure. In contrast to some other jurisdictions with a unified, central financial regulator, the U.S. regime is a matrix of federal and state-level legislation, which impacts distinct aspects of fintech software development. This distributed model can be particularly challenging for developers trying to navigate the regulations.
At the federal level, some of the most important regulators are the Office of the Comptroller of the Currency (OCC), the Consumer Financial Protection Bureau (CFPB), the Securities and Exchange Commission (SEC), and the Federal Trade Commission (FTC), among others. Each of these organizations has a particular function in regulating different aspects of Fintech operations, ranging from consumer protection to financial stability and market integrity.
Recent actions by the Consumer Financial Protection Bureau (CFPB) point toward a change—regulators are applying the same rules to fintechs as they do traditional banks. For instance, in November 2024, the CFPB required major digital payment companies such as Apple Pay and PayPal to adhere to tightened financial regulations. This move signals a broader trend of increased scrutiny for fintechs.
In addition to federal regulation, states have their own regulations. Each of the 50 states has its own laws and regulatory agencies governing financial services. California’s CCPA and CPRA lead the charge on data privacy, and other states are mimicking. If your app is involved in payments, lending, or investments, licensing will be state-by-state.
The fintech compliance checklist
Building a culture of compliance
Leadership commitment is the first step in this process and affects every member of the team. An active approach to compliance enhances user trust and your company’s reputation and lessens legal risk.
Governance and risk management
There must be a clear compliance framework. Develop exhaustive policies and procedures that encompass all relevant laws and industry best practices. These would cover consumer protection, AML/KYC, security, data privacy, and other pertinent subject matters. Make such materials easily available to your team.
Conduct routine risk assessments to detect vulnerabilities and compliance gaps in your development and implementation processes. Prioritize your compliance activities using a risk-based strategy. The NIST Cybersecurity Framework is an example of a framework that can be used to identify and manage cybersecurity threats.
Make sure all members of your team understand their roles and responsibilities. Assign designated personnel to oversee compliance. A dedicated security champion in your dev team can bridge the gap between regulations and implementation. Use compliance-as-code approaches to track violations in CI/CD pipelines.
Compliance training and awareness
Your development team must know the regulations and guidelines applicable for fintech app development. Developers want secure coding best practices, while product managers need to understand financial rules. Maintain compliance awareness by regularly updating teams on regulatory changes. It could be by newsletters, an internal wiki, or periodic team meetings.
Partnering with a product development company that understands the U.S. fintech space can reduce your compliance risk to a great extent. These companies offer specialized development teams with hands-on experience developing fintech compliant products/solutions, ensuring your application meets the highest standards. This allows your internal team to focus on key business objectives while still relying on external expertise for complex regulatory needs.
Also Read: 3 Steps to Hire an Offshore Software Development Team
Compliance monitoring and auditing
Regular audits and ongoing monitoring are essential to ensure the success of your compliance program. To determine the success of your compliance program and pinpoint areas for improvement, conduct internal audits on a regular basis. For an unbiased assessment of your compliance program, consider hiring external auditors.
Create a procedure to quickly resolve any compliance issues or gaps identified through monitoring and audits. Keep a record of each corrective action.
Protecting your customers and data
Data is the currency of fintech. Mishandle it, and the cost is trust.
Privacy and security by design
Keep only what’s required—laws such as CCPA and GLBA demand it. Be transparent with users about data collection, use, and sharing, and obtain their explicit consent.
Encrypt data at rest and in transit to protect it from unauthorized access. Use strong encryption algorithms and secure key management practices. Have a strategy in place to alert authorities and users in the event of a data breach, in accordance with applicable state law.
Row-level security (RLS) provides a secure solution by integrating access controls directly into the database layer. This ensures that users only access data that belongs to them. RLS minimizes the risk of unintended data exposure and makes security management easier.
Consumer protection and transparency
Creating a trustworthy and user-friendly experience is critical. Adhere to consumer protection regulations. Comply with rules set by the Federal Trade Commission (FTC) and the Consumer Financial Protection Bureau (CFPB), such as truth in lending, fair lending, and clear terms of service.
Make sure your app is accessible to users with disabilities (ADA compliant). Establish a transparent procedure for addressing complaints and resolving disputes.
Securing your technology
Security isn’t just a compliance requirement – it’s a product feature.
Information system security
Proactively find vulnerabilities before attackers do. Implement multi-factor authentication (MFA) and least-privilege access for all privileged accounts. To monitor network traffic and identify and prevent spam, install intrusion detection and prevention systems (IDPS).
Security should be part of the software development life cycle (SDLC). Teach your engineers secure coding practices and periodically review code for security vulnerabilities. Static and dynamic application security testing (SAST/DAST) methods can be used to discover vulnerabilities early in the development process.
Due diligence is essential when using third-party services or APIs. Check these providers for robust security procedures. Make sure your contracts with your vendors include explicit security requirements.
If cloud infrastructure is being used, make sure that your cloud provider maintains robust security controls. Know your responsibility to secure your data and applications in the cloud. Implement cloud-native security tools and services. Confidential computing safeguards data in use, making it a crucial component of cloud security.
Also Read: Why Every Business Should Prioritize Confidential Computing
Payment processing and transaction security
If your fintech application processes payments, it must adhere to certain security standards. Ensure that online transactions are processed through secure payment channels. Verify that your payment gateway provider complies with PCI DSS (Payment Card Industry Data Security Standard). This standard outlines guidelines for protecting cardholder data.
Third –party risk management
Ensure third-party services meet security and compliance standards. Track vendor performance to mitigate risks from integrations.
Meeting regulatory requirements
Non-compliance can lead to hefty fines, legal action, and damage your reputation.
State licensing and registration
Map out state-specific licensing needs. Fintech requirements differ widely and often depend on factors like the type of lending you engage in, whether you handle money transmission, or if you offer investment advice.
In the United States, money transmitters who operate without the necessary state licenses face federal criminal charges for knowingly operating an unauthorized money transmitting business.
Talk to legal experts who specialize in fintech legislation to find out what licenses your business model requires. It is imperative that you take this step, as operating without the necessary permits can lead to significant fines.
Recordkeeping
Maintaining complete and accurate records is crucial for internal corporate operations and regulatory compliance. Create precise data retention guidelines that meet legal specifications. The retention duration for different types of records should be outlined in these regulations.
Keeping documents in a secure location helps prevent unwanted access or alteration. Use appropriate access control and data encryption measures.
Protecting your business
Regulatory compliance isn’t a blocker, it’s a competitive advantage. Customers, partners, and investors trust companies that take compliance seriously.
Intellectual property protection
Your fintech app is an invaluable resource. Protecting your intellectual property (IP) is critical to preserving a competitive advantage and preventing others from replicating your creations. Copyright registration can help you protect your software code. Consider patenting your app’s unique algorithms or processes.
Register your brand, logo, and other trademarks to prevent competitors from using identical marks in the financial services industry. Keep confidential information, such as company ideas, customer lists, and intellectual technologies, as trade secrets. Establish strict confidentiality agreements with employees and contractors.
Fair advertising/ competition
Advertise fairly and ethically. Avoid making false claims or using misleading marketing methods that may harm customers or create unfair competition.
Foreign law in key markets
Before entering new markets, conduct a thorough study of the local regulatory environment. Consult with local legal counsel to verify that your application and business activities comply with all relevant laws and regulations in each target market.
Conclusion
Fintech compliance is about building trust in your product, not fearing regulation. By building security, transparency, and governance into your fintech application from the start, you can reduce risk and set your business up for long-term success.
Where possible, automate, be proactive, and consult legal professionals when necessary. The best fintech solutions are not only compliant, they also set new benchmarks for consumer trust and safety.
This comprehensive fintech compliance checklist can help you with that. Prioritize these key areas to mitigate risk and earn confidence of users, regulators, and investors.
FAQs
What is the biggest compliance risk for fintech startups?
Underestimating state-level regulations; many startups fail to obtain the necessary licenses before scaling.
How can fintech companies maintain ongoing regulatory compliance?
Regular audits, IT reporting, and a dedicated compliance staff to keep up with regulatory changes.
What’s changing in fintech regulation in 2025?
Stricter control of digital wallets and BNPL (Buy Now, Pay Later) services is expected, which will mimic traditional banking regulations.
