Regulatory Overload: How to Navigate the Constant Burden of Regulation | VIXIO

Regulatory Overload: How to Navigate the Constant Burden of Regulation

For the average person, the concept of regulation, or red tape, is little more than an abstract thought that rarely goes beyond a conversation. For payment firms however, the topic is far more serious.

In some cases, what the regulator says or does might mean life or death for their business. For the pan European challenger bank N26, concern from regulators in Germany and Italy about their growth has made a major impact, forcing them to grow more slowly and instead allocate more resources to their compliance department.

This is despite picking up fewer customers than rival Revolut, which is known for taking care to understand the local rules, showing that keeping on track of the regulatory burden is a constant necessity. 

Constant regulatory activity

However, the idea that firms, particularly across multiple jurisdictions, can keep track of everything they need to know easily is far from straightforward.

Analysis from 59 jurisdictions over a three year period shows the constant barrage of regulation that payment firms face.

On average, every month of the last three years has shown over 100 regulatory events, a large proportion of which are actionable changes such as pieces of legislation that payment firms need to pay attention to.

There are dozens of different topics on the required reading list. From having a duty towards consumers, to understanding who exactly you’re dealing with and whether that’s allowed, to keeping up with the regulatory fashions caused by Brexit, COVID-19 and the Ukraine conflict, it’s no wonder VIXIO has found the vast majority of headcounts at compliance departments have risen for payment firms.

And on that last note, payment firms should never be in doubt how quickly the regulatory landscape can change.

Globally, regulatory activity hit a 3-year record high in March 2022, propelled by the response towards the conflict in Ukraine. Analysis from VIXIO’s Ukraine Sanctions Tracker shows the scale of the response, with 22 jurisdictions releasing over 100 regulatory changes less than 6 weeks after the conflict started.

And although data shows this is now starting to slow, our analysis has shown payment firms should be braced for the wider measures designed to ensure the robustness of sanctions, as well as regulation in the name of national security.

Coping with the unexpected

Tracking regulation by itself cannot however predict the emergency measures that typically cause the most disruption. Few regulators publish any timetables of their forthcoming initiatives and the events of Brexit and COVID-19 have shown these are easy to change, making sudden waves of activity difficult to manage.

Lithuania, usually known as a fintech hub but bordering both Russia and Belarus, has been legislating significantly more than usual. In Q1 2022, the country released 22 updates, compared to just 12 for the whole of 2021, with five of these directly related to measures against Russia.

More broadly, Lithuanian regulators have brought in rules creating stricter regulations for crypto service providers through amendments to AML rules, as well as new data security regulations.

And this is not particular to recent events either. In late 2019, Sweden, a usually non-active jurisdiction, produced 33 pieces of primary legislation, which represented over 25 percent of all primary legislation worldwide during that quarter.

And even when your compliance team manages to capture what’s required, the deck can still be stacked against you.

In Denmark for example, new payments legislation was proposed in November 2020 but gave only two weeks for industry responses, a time when most people are likely to be thinking more about relaxation than regulation. 

Managing the cost

All of this adds cost, both directly in terms of a larger compliance team, and indirectly, by restricting the range of business opportunities that firms could seek to profit from.

In 2017, a survey of US banks by the Risk Management Association revealed that compliance costs amounted to 6-10 percent of their revenue, an astronomical figure, given this is being spent to keep out of trouble. And in some cases, entire product ranges that took years of time and effort can become unviable without much warning.

From Facebook’s Diem, to payday loans, interchange fees, certain crypto products, P2P lending and products that found a niche serving Russia and Ukraine, all were dealt a serious economic blow from the regulator.

Yet for many payments firms, the remedy to this is old-fashioned. Large teams of highly specialised compliance officers, combined with expensive and outdated legal advice from counsel.

Before being onboarded, one VIXIO client estimated that, despite paying for external legal advice, their compliance team continued to allocate up to 30 percent of its time to regulatory research. Time which could have been spent helping their product or strategy team work out the best place for the company to grow and expand.

The traditional remedies

For new market entrants, especially, unknown or unmanaged risks can spell commercial death. Going in blind is hardly an option.

A common solution is to team up with an established local player, but this can mean missing out on the full opportunity that new markets and products provide, not to mention undermining your reputation, stealing your trade secrets and clients, or simply not delivering on their end of the deal.

What’s needed is an overview of current and future regulatory developments in the new markets, the regulators, licencing framework, local rules, requirements, as well as a general guide for how to enter new markets.

This’ll allow your team to manage the groundwork, while making it easier for you to present that information to the board, helping to make those crucial business decisions. 


What’s needed is an overview of current and future regulatory developments in the new markets, the regulators, licencing framework, local rules, requirements, as well as a general guide for how to enter new markets.

This’ll allow your team to manage the groundwork, while making it easier for you to present that information to the board, helping to make those crucial business decisions. 

Getting a full picture

That’s where VIXIO helps.

If you are seeking new overseas markets or need a quick and easy check that you’re fully compliant with domestic regulations, our Requirements Tool helps paint the full picture of all of your current obligations. Additionally, our Horizon Scanning Tool will flag any impending regulatory policies and initiatives that could affect your plans.

VIXIO’s country guides offer even greater detail, complete with analyses and forecasts, in a single digital format. Currently, they cover 43 countries. This gives you a comprehensive overview on how to build your strategy around these crucial markets. 

It can be overwhelming trying to navigate the constantly-evolving regulatory landscape. However, the best in the industry have found ways to remain compliant and enable innovation at the same time. Download your free copy of the 2022 Global Regulatory Index to track regulatory activity across key jurisdictions.

We've got your compliance covered, so you can focus on growth.

Whether it’s Brexit, SCA, the 6th AMLD or PSD2, stay on top of regulatory change across multiple global jurisdictions.
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