Beyond Compliance-Fintech Edition
Beyond the Compliance Checklist: A Strategic Legal Guide for Fintech Founders, Lawyers, Executives, and Investors.
For years, legal strategy in fintech was viewed as a necessary burden, basically something to be tolerated rather than harnessed. Many business personnel and compliance teams and even boards in the financial services industry believe that so long as they tick the boxes of compliance, such as, registration and licensing, drafting basic contracts and maintaining KYC, they are strategically covered.
We dare say, this mindset is neither viable nor is it a strategy. In Africa and globally, fintech is evolving like a wild fire. What with-new regulations, changing customer behaviour, shifting investor expectations, and accelerating cross-border remittance growth, the game is changing fast! According to GSMA, Africa’s mobile money ecosystem processed over $836 billion in transactions in 2022, demonstrating the sheer scale as well as the stakes involved in getting legal infrastructure right. The risks are just as grand as the opportunities.
While compliance remains critical, reactive approaches often leave firms exposed to risks that can derail growth or destroy valuation. A proactive, strategic legal foundation is now a defining feature of the world’s most successful fintech companies.
In this article, we offer practical guidance for fintech founders, executives, lawyers and investors to move beyond the checklist and embrace legal strategy as a competitive advantage
Why “Compliance-Only” Strategy is Not Working
Let’s agree. A compliance-only approach is inherently reactive! It focuses on satisfying today’s obligations without anticipating the next regulatory wave. Recent trends show that with the expansion of fintech into adjacent but non-traditional sectors such as lending, credit scoring, insurance, wealth management, digital assets, etc, legal risk and exposure is growing exponentially.
Consider these realities:
Recent regulation of Digital Credit Providers in Kenya
In 2022 the Central Bank of Kenya (Digital Credit Providers) Regulations were enacted, requiring governance, data safeguards, AML/CFT compliance, and reporting requirements and new consumer protection standards for all digital lenders in Kenya. Over 400 unlicensed lenders were forced to either scramble for approvals or cease operations.
EU and UK payment institutions
Brexit rewired licensing frameworks overnight. After 31 December 2020, the UK’s exit from the EU and EEA ended the system that allowed financial firms to use a “single license” to operate across all European countries. UK-based payment and e-money companies like Revolut, Wise, Curve, and Starling, which had relied on this unified approval, became “third-country” providers requiring separate licenses to serve EU customers. Likewise, EU fintechs such as N26 needed UK authorization to continue operating in Britain. This regulatory split created major gaps including financial implications for firms that hadn’t secured alternative approvals in advance.
Blockchain protocols:
In the United States, Ripple’s case remains the most significant example of regulatory exposure for blockchain companies. By selling over $1.3 billion of XRP tokens to investors without registering the offering or securing an exemption, Ripple triggered enforcement under the Securities Act of 1933. The Securities and Exchange Commission (SEC) sued the company, leading to trading suspensions, steep legal costs, and lasting reputational damage.
This case illustrates that proactive legal strategies such as early legal due diligence, clear registration plans, and regulator engagement can prevent enforcement actions that jeopardize growth and investor trust. For any block chain venture, anticipating securities law obligations is essential to avoid similar crises. The consequence of reactive compliance is not merely fines as widely perceived by businesses. It has much more implications under the sun including investor distrust, share price devaluation, loss of crucial partnerships and irreversible reputational damage.
What a Good (Fintech) Legal Strategy Looks Like
Let's agree. A compliance-only approach is inherently reactive! It focuses on satisfying today's obligations without anticipating the next regulatory wave. Recent trends show that with the expansion of fintech into adjacent but non-traditional sectors such as lending, credit scoring, insurance, wealth management, digital assets, etc, legal risk and exposure is growing exponentially.
Below is what we see as the pillars and a summary of the core attributes of effective legal strategy:
Regulatory Foresight:
This is achieved through continuous monitoring of emerging laws, anticipation of regulatory changes, and adapting before problems arise.
Intellectual Property (IP) Readiness:
Proactively securing patents, trademarks, and IP assignments to protect innovation.
Data Governance:
Embedding data privacy controls and cross-border compliance in system architecture.
Operational Integration:
Making legal accountability part of everyday decision-making in business and not an afterthought.
Investor-Grade Transparency:
Providing clarity to investors and acquirers on how legal frameworks protect and enable growth.
Below, we explore each pillar in depth with examples and guidance
Investor-Grade Transparency
Why It Matters
Practical Guidance
Case Examples & Impact
Market/Regulatory Example
Regulatory Foresight
Anticipating regulatory changes reduces enforcement risks and builds credibility. African regulators have introduced new frameworks for digital credit, payments, crypto, and data protection.
• Assign ownership of regulatory monitoring across teams
• Maintain a quarterly roadmap
• Map licenses and obligations
• Engage regulators early
Monzo (UK): Participated in FCA’s sandbox. Built trust and fast-tracked licensing.
Impact: 8M+ users.
Revolut (UK): Secured licensing across EU pre-Brexit
Impact: $33B valuation.
M-PESA (Kenya): Worked with CBK to pioneer licensing and regulatory compliance frameworks for mobile money.
Impact: Supports 50M+ users. Now 55% of GDP flows through M-PESA.
Investor-Grade Transparency
Intellectual Property (IP) Protection
Strong IP creates defensive barriers and increases valuations. Underinvestment raises M&A risks.
• Annual IP audits
• Early patent filings
• Trademarks in all markets
• IP assignment clauses
Stripe: Early IP protection fueled $50B valuation.
Plaid: IP governance protected partnerships and secured a US$5.3B deal.
Chipper Cash: Multi-country trademarks helped secure $300M funding.
• Africa: Contributes less than 1% of global patent filings (2023, WIPO)
Operational Integration
Embedding legal strategy in business operations reduces product delays and compliance gaps.
• Involve legal counsel in product design (very important)
• Require legal sign-off for business cases
• Train teams regularly
• Use compliance dashboards
Plaid: Legal and engineering integration enabled rapid, compliant development.
• UK: FCA SYSC Rules (Senior Management Systems and Controls)
• Kenya: CBK Risk Management Guidelines (2021)
• Nigeria: CBN Consumer Protection Framework (2016)
Investor-Grade Transparency
Investors expect clarity on risks. Transparency speeds up funding and improves valuations.
• Maintain a compliance binder
• Disclose legal risks in pitch decks
• Prepare due diligence materials early
Finaro: Legal clarity secured $575M acquisition by US Payments company-Shift4 in March 2022.
FTX: Weak governance destroyed $32B in value.
• US: SEC Regulation D and S
• UK: FCA investor disclosure requirements
• EU: MiFID II disclosure rules
Conclusion
In today’s fintech world, a legal strategy means more than just a compliance cost. It is a growth engine. From regulatory foresight to IP protection, privacy to data governance, a proactive legal strategy enables scale and strong valuation while building trust and unlocking competitiveness.
In our view, there is a world of examples beyond this article that lend credence to our proposition. Simply put, legal readiness is a key pillar of sustainable growth and innovation.
By moving beyond reactive compliance, founders, executives, legal departments and investors can transform regulation from a hurdle into a competitive advantage and build fintech unicorns that are resilient and sustainable.
