Digital payment regulations present a labyrinth of challenges for businesses, so we sought advice from CEOs and founders deeply entrenched in the FinTech space. From the importance of integrating compliance into your operations to participating in regulatory sandboxes, we’ve compiled twelve valuable insights to guide your regulatory navigation.

  • Integrate Compliance into Operations
  • Cultivate a Compliance Culture
  • Draft Clear Contracts with Providers
  • View Regulation as Innovation Catalyst
  • Maintain Dialogue with Regulators
  • Seek Proactive Legal Consultation
  • Build a Flexible Compliance Framework
  • Partner for Regulatory Expertise
  • Ensure Robust Compliance Management
  • Conduct Thorough Vendor Due Diligence
  • Acquire Expertise in Compliance
  • Participate in Regulatory Sandboxes

Integrate Compliance into Operations

Given my experience in the financial management realm, particularly through Rockerbox Tax Solutions, the paramount piece of advice I’d offer businesses facing regulatory challenges in the digital payment space is the necessity of weaving compliance into the very DNA of your operation. One practical example of this in action came when we were refining tax mitigation strategies for clients amidst changing digital tax reporting regulations. We had to ensure that our digital payment systems weren’t just efficient but also entirely compliant with new tax laws that were being introduced rapidly.

The key to our success was adopting a dual-focused approach: First, we ensured that we had real-time access to regulatory updates through a network of tax law experts and fintech partnerships. This allowed us to anticipate shifts rather than react to them. Second, we invested in adaptable digital payment systems. This investment wasn’t just in terms of financial resources but also in dedicating time to train our team on these systems to ensure seamless integration and compliance.

For businesses venturing into or operating within the digital payment space, my advice is to prioritize flexibility and knowledge. Building a flexible operational model around digital payments can make adapting to new regulations less of a burden. Moreover, fostering a culture of continuous learning within your organization ensures that your team remains on the cutting edge of regulatory changes. This combination of flexibility and ongoing education forms a robust defense against the complexities of digital payment regulations, allowing your business to navigate these waters with confidence and agility.

Philip Wentworth, JrPhilip Wentworth, Jr
Co-Founder and CEO, Rockerbox Tax Solutions

Cultivate a Compliance Culture

In my journey with MAH Advising PLLC, navigating the intricacies of digital payment regulations has been a cornerstone of our service offering, especially in sectors like financial services and technology. A memorable instance was when we assisted a fintech startup grappling with SEC and state-level digital asset compliance. Through this process, the importance of dynamic adaptability in legal strategy and operations became crystal clear.

My fundamental piece of advice for businesses contending with digital payment regulatory challenges is the imperative of fostering a culture of compliance from the ground up. This means not only ensuring that your legal and compliance teams are in sync with current regulations but also integrating this knowledge throughout every layer of your organization. For instance, when we provided counsel on cryptocurrency regulations, it wasn’t just about addressing the legalities head-on but also about educating our client’s workforce on the implications and best practices, embedding a proactive compliance mindset across the company.

Moreover, leveraging technology to streamline compliance processes proved invaluable. In one case, we recommended automation tools for real-time regulatory updates and compliance tracking, significantly reducing the risk of non-compliance due to outdated information. This approach not only saved time but also minimized the company’s exposure to legal pitfalls. In the rapidly evolving digital payment arena, staying abreast of changes through technology and cultivating a broad organizational understanding of compliance are critical strategies for navigating regulatory waters successfully.

Michael HurckesMichael Hurckes
Managing Partner, MAH Advising PLLC

Draft Clear Contracts with Providers

Ensure you have clear contracts with digital payment services. Solid, explicit agreements are the foundation of successful business relationships. Even with both sides entering the agreement with positive intentions, thoroughly crafted, legally-binding documents—ranging from Service Level Agreements (SLAs) to Non-Disclosure Agreements (NDAs)—safeguard the interests of all involved.

Regarding adhering to cybersecurity and compliance standards, your contracts must have specific clauses to safeguard your interests. These include data protection clauses specifying the provider’s measures to secure your and your clients’ data, detailed security protocols that the vendor commits to following, and clear responsibilities in the event of a security incident.

As a standard practice, have your legal team review all details before finalizing any agreement.

Paw VejPaw Vej
Chief Operating Officer,

View Regulation as Innovation Catalyst

Given my extensive background in technology and leadership roles at Square, Weebly, and other tech companies, where navigating the complex landscape of digital payment regulations was a constant, my single most valuable piece of advice for businesses dealing with regulatory challenges in the digital payments space is this: Embrace regulation as a catalyst for innovation, not as a barrier.

Regulations are often seen as hurdles in the rapidly evolving digital payments arena. However, my experience has taught me that these regulations can actually spur innovation. By deeply understanding the “why” behind regulations, companies can innovate within the framework to comply with and enhance their product offerings. For example, during my time at Square and Weebly, rather than viewing new compliance requirements as obstacles, we leveraged them to improve our platform’s security and user experience, thereby gaining a competitive edge.

This mindset requires a proactive approach to regulatory engagement. You can stay ahead of upcoming regulations through active participation in industry forums and dialogues with regulatory bodies. This not only helps in anticipating changes but also in influencing policy development in ways that support innovation and growth.

In sum, my advice is to reframe how you view regulatory challenges as opportunities to differentiate and elevate your offerings. This approach has been instrumental in my journey, turning potential limitations into launchpads for product and service enhancements that better serve our customers and set new industry standards.

Darian ShimyDarian Shimy
Founder & CEO, FutureFund

Maintain Dialogue with Regulators

I would advise that staying abreast of changing rules and keeping an open dialogue with regulators is one of the most important things a business can do. Payment rules and technologies are evolving rapidly, so maintaining an ongoing study of emerging trends and compliance developments is essential.

Reach out proactively to regulatory agencies and participate in public comment periods. Provide feedback on how proposals may impact operations to potentially influence accommodating specifications. This engagement improves understanding on both ends to find workable solutions that keep innovations permitted safely.

Consider aligning with industry trade groups as well. Their involvement gives collective voices representation during policy drafting, which is beneficial for multiple enterprises versus solo efforts that have less sway. Organizations similarly circulate education, facilitating preparedness.

Overall, keeping an open line of communication and supporting productive relationships secures flexible guidance adaptable to unique challenges faced, rather than reactionary penalties that damage finances or public trust. By staying conversant as fields transform, agile businesses steer rulings favoring continuous progress, benefiting customers and society through lawful cooperation.

Lyle SolomonLyle Solomon
Principal Attorney, Oak View Law Group

Seek Proactive Legal Consultation

In navigating the complexities of digital payment regulations, a critical lesson from my experience involves staying proactive and well-informed about regulatory changes. One standout example can be traced back to when we were handling the financial aspects of a small business’s restructuring. The dynamic nature of digital payment laws meant we constantly had to adjust our strategies to remain compliant, especially with the evolving regulations surrounding the Paycheck Protection Program (PPP) during the recent stimulus package legislation.

My advice to businesses facing similar regulatory challenges is to establish a solid relationship with a legal team that specializes in tax and business law, with a keen focus on the evolving digital landscape. This partnership is invaluable because it ensures you’re not just reactive but also ahead of regulatory changes, minimizing potential compliance risks.

Engaging with a legal firm that keeps a pulse on regulatory shifts, as we did during the PPP application process, allows your business to adapt swiftly. The collaboration proved essential in ensuring that the applications we managed complied with the latest requirements, securing much-needed funds for businesses without delay. Through this experience, I’ve learned that in the digital payment space, the combination of proactive legal consultation and staying informed about legislative changes is your best defense against the complexities of compliance.

David BrillantDavid Brillant
Founder, Brillant Law Firm

Build a Flexible Compliance Framework

In the intricate world of digital payment regulations, where navigating compliance can often feel like moving through a constantly shifting landscape, there’s one strategy that has profoundly shaped my approach: building a flexible and informed compliance framework from the outset. This foundation has been pivotal for Zibtek as we delve into projects that integrate financial technologies, where the regulatory environment can be both stringent and dynamic.

The cornerstone of this strategy is to design your systems and processes with adaptability in mind. This means creating a compliance framework that can quickly adjust to new regulations or changes in existing laws. It’s about investing in scalable technologies and ensuring that your team is not just knowledgeable about current regulations but is also continuously monitoring the regulatory landscape for any shifts that could impact your operations.

Additionally, educating your team on the importance of compliance and creating a culture that prioritizes it is crucial. When everyone understands the “why” behind the compliance efforts and the potential repercussions of non-compliance, it fosters a more conscientious approach to navigating these challenges.

This advice, focusing on flexibility and continuous education, is not just about minimizing risk. It’s also about seizing opportunities to innovate within the regulatory frameworks, enabling your business to remain competitive and compliant in the fast-evolving digital payment sector.

Cache MerrillCache Merrill
Founder, Zibtek

Partner for Regulatory Expertise

Consider partnering with another FinTech or bank that performs a specific service if you lack the expertise to handle regulatory challenges yourself. For example, many neobanks and marketplace platforms use Plaid’s KYC services instead of designing their own KYC solutions.

Eric NovinsonEric Novinson
Founder, This Is Accounting Automation

Ensure Robust Compliance Management

Prioritize compliance and transparency to navigate digital payment regulations. Ensure understanding of and adherence to relevant regulations. These can include PCI DSS for payment security and GDPR for data protection.

It is essential to mitigate risks and maintain trust with customers through robust compliance management processes. Regularly audit and update your policies and procedures to stay current with evolving regulatory requirements.

Foster open communication channels with regulatory bodies and industry stakeholders. This can facilitate proactive engagement and helps navigate complex regulatory landscapes more effectively. Compliance and transparency are the keys to a solid foundation for sustainable growth and success in the digital payment ecosystem.

Perry ZhengPerry Zheng
Founder and CEO, Pallas

Conduct Thorough Vendor Due Diligence

When you partner with a third-party vendor, make sure you’re serious and foolproof about due diligence. You need to confirm they comply with all necessary regulations and security standards.

At the end of the day, you’re entrusting your payment processing to a third-party vendor, which means you’re also handing over sensitive customer data. Failure to verify that these vendors adhere to necessary regulations could lead to severe consequences, ranging from legal penalties to irreparable damage to your business’s reputation.

To do this, start by thoroughly researching the vendor’s track record and reputation within the industry. Don’t hesitate to ask them about their compliance with industry standards and regulatory requirements, such as PCI DSS (Payment Card Industry Data Security Standard) for handling cardholder data.

Aside from this, you also want to get a good look at their security protocols and data protection measures to ensure they align with your business’s standards and expectations. Vendors that have nothing to hide will be more than happy to give you the clarity you need.

Riley BeamRiley Beam
Managing Attorney, Douglas R. Beam, P.A.

Acquire Expertise in Compliance

My key piece of advice for companies dealing with the regulatory intricacies of digital payments is to prioritize building or acquiring expertise in compliance. This can be achieved through forming a dedicated internal team focused on regulatory matters or collaborating with external experts who keep abreast of the evolving legal framework surrounding digital payments. My personal experience underscores the notion that regulations should not be viewed merely as hurdles.

Rather, they present unique opportunities to stand out, safeguard our operations, and our clients’ interests. Commitment to compliance has been a cornerstone in establishing trust with our partners and clientele, thereby supporting our expansion and enhancing our reputation in the market.

Ace ZhuoAce Zhuo
Business Development Director (Sales and Marketing), Tech & Finance Expert, Cheap Forex VPS

Participate in Regulatory Sandboxes

For businesses grappling with digital payment regulations, Regulatory Sandbox Participation can be a great idea. Regulatory authorities offer sandboxes where businesses can test their payment solutions in a controlled environment and receive regulatory guidance and feedback. So, primarily, this is how the phenomenon works: enterprises submit their digital payment solutions to regulatory sandboxes, where they undergo testing for different circumstances.

Sandboxes allow businesses to assess the viability, efficiency, and security of their digital payment methods according to regulatory compliance before they adopt them on a full-scale basis. Besides, regulatory professionals can also offer valuable insights and support businesses throughout the testing processes in the sandbox, so business owners can navigate intricate regulatory requirements effectively.

Nikita SharmaNikita Sharma
Chief Marketing Officer, Hicentrik Digital Marketing

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