Fintech(s) at the Regulatory Crossroads

Fintech companies—particularly those engaged in digital payments, lending, e-wallets, and crypto assets—operate in an ecosystem defined by speed, scale, and regulation. While the innovation lifecycle shortens, the regulatory lifecycle intensifies. For EU-based and passporting fintechs, legal teams are increasingly expected to deliver reportable compliance, not just textual compliance. This means regulatory duties must be operationalised into systems, governance, and product architecture.

This article outlines the key regulatory reporting duties, supervisory expectations, and compliance structures fintechs must embed to remain compliant, scalable, and strategically aligned with EU regulatory trends.

1. Core Regulatory Reporting Duties Applicable to Fintechs

A. PSD2 (Second Payment Services Directive)Applies to payment institutions, e-money providers, and firms offering account information or payment initiation services.

Key Reporting Obligations:

• Operational and Security Incidents (Art. 96 PSD2): Must be reported to competent authority within specified timelines (e.g., within 4 hours of detection for major incidents).

• Fraud Reporting: Quarterly fraud data submitted to EBA via national authority.

• Statistical Reporting: Transaction volumes, access interface performance (for ASPSPs).

B. AMLD (Anti-Money Laundering Directives, esp. 4th–6th AMLD)Applies to credit institutions, payment firms, and crypto service providers (under MiCA as well).

Reporting Duties:

• Suspicious Transaction Reports (STRs) to national FIUs.

• Customer Due Diligence (CDD) failures or risk reassessments.

• Risk Assessments at onboarding and periodically (Art. 8 AMLD4).

• Cross-border group reporting under AMLD6 for parent entities.

C. Consumer Credit Regulation (CCD / national transpositions)Applies to fintech lenders, BNPL platforms, and embedded finance providers.

Key Duties:

• Pre-contractual disclosures (Standard European Consumer Credit Information form).

• Creditworthiness assessments documentation and audit trails.

• Marketing materials & representative APR disclosure must be recordable and retrievable.

D. GDPR Reporting and Governance (particularly Art. 30, 33, 35, 36)Applies to all fintechs handling personal data, especially in onboarding, credit scoring, and payments.

Key Reporting Obligations:

• Data breach notifications (Art. 33) within 72 hours to DPAs.

• Record of Processing Activities (RoPA) (Art. 30).

• Data Protection Impact Assessments (DPIA) (Art. 35).

• Prior consultations with DPAs (Art. 36) for high-risk processing.

2. Supervisory Interaction and Communication Structures

Supervisory bodies (e.g., national financial supervisory authorities, FIUs, DPAs, EBA, ESMA) expect proactive communication. Passive compliance is insufficient.

Best Practice Compliance Structures:

• Appoint a Regulatory Reporting Officer or team under Legal/Compliance to own timelines, content accuracy, and audit response preparedness.

• Maintain a regulatory calendar and register of reporting triggers (incident, periodic, ad hoc).

• Integrate regulatory reporting into GRC software or workflow automation tools.

• Use secure portals and standard templates (EBA templates, FIU reporting formats).

3. Embedding Compliance in Product and Operational Infrastructure

Legal and compliance obligations must be operationalised into backend systems and product logic.

Key Structures to Implement:

• Policy-to-System Mapping: Every internal policy (AML, data, credit) should map to system functionality or controls (e.g., SCA flows, data retention tools).

• Regulatory Triggers in Architecture: Code-level or admin triggers for fraud, large transactions, abnormal IP logins, failed verifications, etc.

• Customer Comms Controls: Ensure change notifications, credit terms, and consent statements are sent/stored per legal duty (and dispute ready).

Governance Tools:

• Risk & Control Matrix (RCM): Link each legal duty to business owner, control owner, frequency, format, and review cycle.

• Internal Audit Trails: Regulators may request evidence of control performance or override documentation—especially in lending and AML.

4. Enforcement Trends: What Regulators Look For

EU and national regulators are increasingly focusing on substance over form. Legal text is no longer enough; regulators ask:

• Can you show proof of timely reports filed (incidents, STRs, breaches)?

• Are your product flows compliant with PSD2, CCD, AMLD by design—not just in documentation?

• Do you have reporting logs, access protocols, and incident playbooks for legal events?

• Are your data processors monitored and your AML systems regularly tested?

Key Insight: Enforcement now targets deficient systems and governance, not just wrongful acts. If a breach occurs and there’s no escalation protocol or root-cause investigation log, the fintech is exposed—even without intent.

5. The Role of Legal Counsel in Fintech Compliance

Modern fintech legal counsel must act as:

• Legal Architect: Designing compliance into product and system logic.

• Risk Translator: Turning evolving EU directives (e.g., CCD recast, AML package, MiCA) into actionable strategies.

• Regulator Communicator: Managing tone, clarity, and defensibility in supervisory engagement.

• Operational Advisor: Ensuring that legal risk is embedded in OKRs, platform audits, and internal accountability.

Conclusion: Compliance as Scalable Infrastructure

In today’s fintech environment, compliance is not a fixed set of tasks—it’s an architectural mindset. Legal and compliance teams must co-create ecosystems that anticipate legal risks, capture reporting duties in real time, and turn supervisory trust into competitive advantage.

As fintechs expand across the EU, their regulatory infrastructure must evolve from reactive compliance to data-driven, legally embedded, and regulator-aligned systems.