Potential Influencing Factors Identified by the Commission Beyond the Initial Ones
European FinTechs and Financial Institutions Address Compliance Fatigue
In the face of rapidly changing regulations and growing concerns about stricter KYC/KYB requirements and transaction monitoring, European FinTechs and financial institutions are seeking more integrated, efficient, and modern compliance solutions to combat compliance fatigue, reduce operational costs, mitigate fraud losses, and update outdated compliance infrastructure.
According to a study, over 50% of European fintech professionals identify "keeping up with changing regulations" as their biggest challenge, while 44% highlight high operational costs due to compliance. The complexity and fragmentation of compliance processes lead to inefficiencies and false positives, draining resources and preventing proactive fraud prevention strategies.
Fraud losses are significant, with 55% of firms losing €100,000 to €1 million annually, and 18% losing over €1 million, driven by emerging fraud types such as AI-driven deepfakes and synthetic identity fraud that outdated, manual, or siloed compliance systems struggle to detect.
To address these challenges, institutions are modernizing compliance infrastructure by adopting more integrated digital tools and analytic technologies to enhance transaction monitoring effectiveness and reduce false positives. This modernization is essential to build operational resilience amid rising regulatory pressure and fraud risks.
Ilya Brovin, Chief Growth Officer at Sumsub, stated that the solution lies in improving efficiency, user experience, and ensuring sustainable growth. He emphasized the need for a more integrated approach, saying, "We need to move away from fragmented, manual compliance towards integrated technology-driven solutions that reduce costs, strengthen fraud defenses, and maintain regulatory adherence in a complex and evolving environment."
Collaborative efforts between fintech firms, financial institutions, and regulators are also playing a crucial role in shaping sound regulatory frameworks that balance innovation with strong supervision, facilitating more efficient, future-ready compliance ecosystems. Insights from global regulatory dialogues like those in Taiwan contribute to this collaborative effort.
Moreover, the study shows growing concern about stricter regulations, with almost half (47%) expecting higher penalties for non-compliance in the next 12 months. Over 20% of companies cannot detect new, innovative fraud methods, highlighting the need for ongoing compliance.
Interestingly, 76% of all fraud cases occur post-onboarding, emphasizing the need for ongoing compliance. Over 53% of companies use manual processes for reporting suspicious activities and transactions, which is inefficient and prone to errors.
In conclusion, European fintechs and financial institutions are combating compliance fatigue by moving away from fragmented, manual compliance towards integrated technology-driven solutions that reduce costs, strengthen fraud defenses, and maintain regulatory adherence in a complex and evolving environment. This shift towards more efficient and modern compliance solutions is crucial for the sustainability and growth of the European FinTech and financial services industry.
[1] Source: European FinTech Compliance Report 2021 [2] Source: The Future of Compliance in the European Union: A Modern Approach [3] Source: The Impact of Compliance on European FinTechs [4] Source: The Rise of Emerging Fraud Types in Europe: A Compliance Challenge [5] Source: Global Regulatory Dialogues: Shaping the Future of Compliance in Europe
- To address the challenges of high operational costs and outdated compliance infrastructure, European FinTechs and financial institutions are modernizing their approach by adopting integrated digital tools and analytics in business, inviting technology to help reduce false positives and streamline transaction monitoring.
- In line with an emphasis on maintaining regulatory adherence and strengthening fraud defenses in the face of new technologies like AI-driven deepfakes and synthetic identity fraud, the focus on a more integrated and technology-driven career in compliance is growing, as highlighted by the growing concern about stricter regulations in the European financial sector.
