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Fintech: Using compliance as a competitive advantage in 2017

East Africa’s FinTech scene is ‘boomin’. Major disruptive developments are identifiable: crowd funding is becoming an important part of corporate finance, mobile payment is growing fast, virtual currencies such as bitcoin are gaining popularity and algorithms are providing a new way of assessing credit-worthiness.

The main challenge in launching and expanding FinTech businesses is navigating the complex regulatory landscape, to understand, develop and implement a compliance and regulatory framework and to obtain the required regulatory permissions to get started.

To add on to my previous post I thought it would be useful to highlight the key compliance issues that FinTech firms should be focused on in 2017, whether they plan to revolutionize the delivery of a financial service, or simply provide a better mouse trap to existing industry players. FinTech investors also can use this post to ask questions of the companies they have or will invest in as a way to gauge whether management’s creativity extends to the concerns of key regulators.

Operating FinTech that is separate from regulation

Ideally before rolling out, a Fintech firm will have to undertake a detailed analysis of its business model against applicable financial regulation to fully understand what can be achieved without becoming a regulated entity, or, conversely, to help them seek appropriate licenses or approvals.

Anti-money Laundering

The Proceeds of Crime and Anti-Money Laundering Act (POCAMLA) of 2009 introduced various obligations and restrictions on “financial institutions” as measures for combating money laundering. The extent to which the POCAMLA affects the operations of a Platform depends on whether the Platform falls within the definition of “financial institutions” or a “designated non-financial business”. POCAMLA defines financial institutions to include:

  • any person who transfers funds or value through formal and informal channels;
  • issues and manages means of payment including credit cards and electronic money; and
  • engages in money and currency changing.


Cyber security issues continue to present compliance challenges for everyone, with reports of high-profile cyber events now a regular occurrence. FinTech firms are no exception to this trend. In fact, the intersection between cybersecurity and FinTech business models means that FinTech firms will likely find themselves increasingly in the cybersecurity “crosshairs” in 2017.

Consumer protection 

Laws and regulations governing the provision of financial services and products to consumers/retail investors are part of the FinTech competitive landscape. Depending on the nature of the particular product or service, firms may need to understand consumer protection is a constitutional right and that a customer includes a natural person or a company which the firm may contract with or would offer its services to.

Opportunity & outlook

The momentum of the tech boom should build a good platform for potential capacities of FinTech firms in the East African region. Networking, know-how and resources sharing between start-ups, investors and established players on the market are essential for the success of startups.

Firms should also recognize that as they become more successful, regulators such as the CBK will increasingly turn their attention to FinTech. The areas highlighted above may provide the lens through which regulators will seek to further regulate FinTech. Even firms that only provide their technologies to others will feel the pressure from vendor management requirements.

The tip

Speed and reliable partnerships are key to success. To deal with the legal issues, a reliable partner makes a difference. Regulation is a hurdle but a solvable one.