FinTech regulation

May 2025  |  WORLDWATCH | SECTOR ANALYSIS

Financier Worldwide Magazine

May 2025 Issue

The global FinTech sector is a trillion-dollar market. Technological disruption, modernisation of payments infrastructure and heightened regulatory scrutiny are doing much to drive transformation in this sector. It is an evolution that is reshaping financial services and presenting opportunities for improved efficiency, automation and customer-centric solutions. As technology continues to evolve, the innovative products and services provided by FinTechs will continue to reshape the financial services landscape as we know it.

FW: Reflecting on the last 12-18 months, what major trends would you highlight in the FinTech sector? What opportunities has the current market presented?

CANADA

Abudulai: Funding in Canada’s FinTech industry continues to grow, and several notable funding transactions closed over the last 18 months. Canada’s anti-money laundering (AML) and anti-terrorist financing regime has been expanded to include financing entities, such as ‘buy now, pay later’ (BNPL) FinTechs that meet the relevant criteria. Artificial intelligence (AI) solutions are expected to transform most industries, including financial services (FS). As to the current market and opportunities, economic uncertainty because of actions – threatened or realised – of the current US administration may have a chilling effect on foreign investment in Canadian FinTechs and Canada’s FinTech industry. Additionally, the prorogation of Parliament and upcoming federal election delay legislative amendments including open banking. This not to say that opportunities are not present; however, one must be mindful of the current political and economic environment as these developments impact growth opportunities.

UNITED KINGDOM

Makarova: The current market presents great opportunities for FinTech firms that choose the compliance route and set out to achieve regulatory compliance to aid their development and growth. The right regulatory and compliance posture may in fact become the saving grace of the FinTechs that choose this path. Although the road to compliance may be difficult and costly, once achieved, compliance will likely become a huge competitive advantage and lead to growth of customer base.

MALTA

Zammit: Over the past 12 to 18 months, Europe’s FinTech and payments landscape has seen rapid digitalisation, regulatory shifts and increased investment. Digital payments continue to rise, with card and mobile transactions gaining ground as cash use declines. Instant payment solutions, such as the European Payments Initiative’s ‘Wero’ wallet, are streamlining cross-border transactions, while regulators explore the digital euro to enhance monetary resilience. Meanwhile, the Malta Financial Services Authority (MFSA) continues to provide much-needed perimeter guidance in this sector. In two key 2025 circulars, the MFSA addressed terrorism financing risks in crypto services and highlighted some shortcomings in the manner in which financial institutions (FIs) manage outsourcing and safeguard client funds. These communications reflect Malta’s alignment with the Markets in Crypto-Assets Regulation (MiCA) and a more robust, risk-based supervisory approach. FIs are expected to adopt stronger governance, enhance due diligence and ensure proper segregation of client assets. Collectively, these developments signal heightened regulatory scrutiny and the maturing of Europe’s digital financial ecosystem.

SOUTH AFRICA

Reddy: FinTech companies are focusing on financial inclusion by developing mobile banking, micro-lending and digital savings platforms for underserved communities. There are opportunities to further innovate by expanding these services, offering micro-insurance products and creating digital financial literacy programmes to empower consumers. In terms of regulatory developments, the continued work done by the Intergovernmental Fintech Working Group has helped foster a more conducive environment for FinTech innovation, and the Regulatory Sandbox has created opportunities for FinTech and RegTech companies to test new products and services in a controlled environment, fostering innovation while ensuring compliance. There has been a notable increase in interest in cryptocurrencies and blockchain technology in South Africa. This interest is driven by the regulation of cryptoassets under the Financial Advisory and Intermediary Services (FAIS) Act and the central bank’s exploration of a central bank digital currency. FinTech companies have the opportunity to capitalise on this growing interest by developing secure and user-friendly cryptocurrency trading platforms, and focusing on cyber security solutions.

AUSTRALIA

Clark: Over the past 12 to 18 months, key trends shaping the FinTech sector include technological disruption, the modernisation of payments infrastructure and evolving regulatory reforms. The emergence of advanced technologies such as quantum computing, agentic AI and large language models (LLMs) are significantly reshaping various industries, while the continued growth of Web 3.0 is challenging traditional financial systems. These innovations present opportunities for improved efficiency, automation and customer-centric solutions. However, they also raise challenges in areas like security, privacy and operational resilience. Regulators are looking to tighten compliance requirements for FinTech companies, and in Australia, a modernised licensing framework for payment providers may be introduced later this year. The current market offers FinTech firms the chance to leverage these advancements to drive innovation, but it requires balancing technological adoption with careful management of associated risks and regulatory obligations.

SINGAPORE

Liew: Two major trends in FinTech have emerged over the past 12 to 18 months. First, there have been various regulatory advancements in the crypto space with the European Union (EU) implementing the MiCA, the US moving to a more cohesive federal strategy for crypto adoption, Taiwan establishing a self-regulation framework, and Japan and Singapore refining its regulatory framework. With institutional players increasing their involvement in tokenisation and digital asset projects, regulators are also looking to tighten regulation around banks’ exposures to cryptocurrencies. And second, nearly all merchants in Singapore have adopted QR code payment systems, and over 90 percent of the population is using digital payment schemes. With Asia leading in digital wallet penetration, we see potential in emerging markets, such as Africa, which could unlock further opportunities. With increasing regulatory advancements in crypto, we expect to see more digital wallets used for seamless fiat-crypto conversion.

FW: How is technology assisting financial services firms to transform their operations and meet compliance requirements?

UNITED KINGDOM

Makarova: Technology has brought a tectonic shift to the world of FS. The sector has been actively deploying various technological developments to change the way they operate. The rise of neo banks, for instance, and their astronomical growth in the last few years, has demonstrated that customers are prepared to move to the banks that operate fully on technology platforms, without any high-street presence or physical branches. Compliance has also become more automated and the financial sector has been cautiously incorporating AI into its internal, and sometimes client-facing, practices.

MALTA

Zammit: Technology is playing an increasingly critical role in enabling FIs to modernise operations and meet stringent compliance obligations under evolving EU regulatory frameworks. With the rapid proliferation of regulatory requirements under regimes such as the second Markets in Financial Instruments Directive, MiCA, the 6th Anti-Money Laundering Directive and the Digital Operational Resilience Act (DORA), FIs are turning to technology not merely for efficiency but as a strategic compliance enabler. In regulatory compliance and reporting, RegTech tools powered by AI and machine learning are automating data collection, transaction monitoring and real-time risk assessments – crucial for satisfying obligations under AML, know your customer and sanctions regimes. Client onboarding and digital identity verification have similarly been transformed through biometric authentication and electronic identification, authentication, and trust services-compliant digital signatures, reducing friction while maintaining regulatory rigour. Blockchain technology is being adopted to improve transaction transparency, settlement finality and auditability, particularly in payments and securities trading. Finally, cloud computing and cyber security frameworks aligned with DORA are facilitating secure, scalable infrastructure while enabling robust incident reporting and information and communication technologies (ICT) risk management. EU FIs embedding technology into their governance, risk and compliance frameworks are clearly setting themselves apart in the continuous struggle to adapt to supervisory expectations, mitigate risk and maintain competitive resilience in an increasingly regulated and digitalised market.

SOUTH AFRICA

Reddy: Technology is significantly transforming FS firms by enhancing their operations and ensuring compliance. The adoption of digital payment solutions and mobile wallets has surged, driven by increased smartphone and internet penetration. Companies like SnapScan, Zapper and Yoco are providing secure and convenient cashless transaction options. This trend presents opportunities for FinTech firms to expand digital financial services, develop advanced mobile wallet features and integrate with e-commerce platforms. Additionally, the InsurTech sector is leveraging data analytics and AI to streamline insurance processes, enhance customer experience and offer personalised products. These advancements enable FS firms to operate more efficiently, meet compliance requirements, and cater to the growing demand for innovative and sustainable financial products.

AUSTRALIA

Clark: Technologies like agentic AI and LLMs are helping FS firms transform operations by streamlining processes and improving compliance. These technologies enhance fraud detection and prevention, bolster customer service through intelligent chatbots and increase operational efficiency. AI models are also being deployed to analyse vast amounts of data, including non-traditional sources, to make more informed decisions, such as credit risk assessments. Additionally, these technologies help with personalising financial products and services, offering tailored solutions based on customer behaviour. Through automation, FinTech tools can also assist in meeting regulatory compliance more efficiently by ensuring accurate transaction monitoring, reporting and due diligence processes.

SINGAPORE

Liew: Technology is playing a pivotal role and there is increasing focus on how FIs can leverage technology for greater efficiency. AI-powered tools such as generative AI are being used for fraud detection, risk management and customer service to provide real-time insights and improving decision making. AI is also having an undeniable impact in terms of AML and countering the financing of terrorism (CFT) and fraud detection. Additionally, the Monetary Authority of Singapore has launched the Collaborative Sharing of Money Laundering/Terrorism Financing Information & Cases platform to enhance the financial system’s defence against money laundering, terrorism financing and proliferation financing. Among other benefits, AI algorithms analyse vast amount of data and enable real-time monitoring of transactions across participating FIs.

CANADA

Abudulai: FS firms are using technology to aid in their regulatory compliance obligations, including reporting and record-keeping requirements. Client identification, such as know your customer, and monitoring tools deployed by FinTechs continue to be used, including for matters such as sanctions screening. AI is being explored or used for credit underwriting and credit risk management, fraud detection and prevention, and managing relationships with customers and regulatory bodies. Use cases for AI in FS and other industries have been put forward as to the pros and cons of the technology in customer management, compliance, risk, operations and efficiency in tasks and task management.

FW: What do you consider to be the main risks and challenges facing FinTech companies as they assess their strategies? How are these factors influencing their business activities?

SOUTH AFRICA

Reddy: South African FinTech companies face several risks and challenges, including regulatory uncertainty, cyber security threats, intense competition, funding constraints, talent acquisition and market adoption. These factors influence their business activities by necessitating significant investments in compliance, security, differentiation, talent and marketing, which can impact their growth and profitability.

AUSTRALIA

Clark: FinTech companies are currently grappling with several key risks and challenges. First, the rapid pace of technological disruption, particularly the rise of AI, is creating both opportunities and operational risks. Second, regulatory reform – while necessary – presents challenges in adapting to an evolving legal framework. In Australia, these changes are especially significant given the industry’s evolving stance on consumer protection, AML and privacy. Finally, the rise in scams and fraud continues to pose risks to both firms and consumers. Quantum computing is also an emerging challenge; while it could revolutionise the industry, it raises concerns around data security and the potential obsolescence of existing encryption methods. These factors push FinTech companies to prioritise flexible strategies that balance innovation with a rigorous focus on security, resilience and compliance.

CANADA

Abudulai: Economic uncertainty and the pace of regulatory developments provide challenges for growth and bringing products and services to market. In addition to the banking sector, FinTechs that provide financing solutions are strategising to address anticipated slowdown in growth and bad loans. Business strategy, including proposed expansions into Canada or investment in the FinTech sector, will be impacted by continued economic turmoil. Undefined and developing regulatory frameworks, including to address open banking and the use of AI, create uncertainty as to regulatory obligations and compliance policies and procedures required to address risks associated with open banking and AI. Data breaches and cyber security also continue to be challenges faced by the industry.

SINGAPORE

Liew: Given the increasing reliance on digital platforms, cyber security threats – such as data breaches, identity thefts, scams and fraudulent transactions – are a key risk for FinTech companies. Organisations are having to invest more in robust security measures, and regulators are also tightening measures around online scams. Regulatory compliance and navigating complex and evolving regulatory regimes, particularly for global FinTechs, remains a challenge as the business environment and attendant risks evolve.

MALTA

Zammit: The main risks and challenges facing EU FinTech companies today are closely tied to the regulatory, operational and macroeconomic environment in which they operate. Chief among these is regulatory complexity and fragmentation, particularly as firms navigate new frameworks such as MiCA, DORA, and the evolving AML and CFT rulebook. While these regimes aim to create consistency across the EU, transitional periods, varying levels of national supervisory readiness and potential divergence in enforcement pose a significant compliance burden, especially for early-stage or scaling firms. Cyber security and operational resilience are also critical concerns, particularly under the stringent requirements of DORA. FinTechs are increasingly more pressured to invest heavily in ICT risk management and incident reporting frameworks or risk supervisory sanctions and reputational damage. Access to funding has also tightened, with rising interest rates and investor caution impacting the pace of innovation and expansion. These challenges are driving a shift in business strategies. Many firms are prioritising regulatory readiness, focusing on partnerships with established FIs, and adopting more sustainable, compliance-by-design models to ensure long-term viability.

UNITED KINGDOM

Makarova: With the advent of LLMs and AI, as well as more sophisticated automation of internal compliance systems and controls, FS firms are now walking a tightrope between making the best use of technology and ensuring that they do not misuse it and put customers at risk as a result. The Financial Conduct Authority (FCA) has also been keeping a close eye on how technology advancements permeate the financial sector and has been vocal about warning FS firms of the risks of misuse.

FW: Have any recent, notable banking and financial services regulations been introduced? How have they impacted the FinTech sector?

SINGAPORE

Liew: MiCaR, which aims to create a harmonised framework for cryptoassets across EU member states to address stablecoin issuance, AML requirements and consumer protection, is a notable development. This harmonisation seeks to reduce regulatory fragmentation across EU member states and provides further guidance for cryptoasset issuers and services providers. We expect these harmonised and structured standards for licensing, transparency and disclosure, consumer protection and market stability which will help the industry build credibility and drive increased institutional adoption. Notably, the regulatory uniformity that MiCaR offers, particularly in comparison to the fragmented regulatory landscape in Asia – where a different licence and regulatory regime would need to be sought in each jurisdiction – gives the EU a competitive edge for FinTechs looking to start up and expand their global offerings.

MALTA

Zammit: Several significant regulatory developments have recently emerged within the EU, with notable implications for the FinTech sector. Chief among them is the European Commission’s proposal for the third Payment Services Directive (PSD3) and accompanying Payment Services Regulation, published in June 2023. Together, these aim to modernise and consolidate the EU payments framework, address regulatory fragmentation under PSD2, and enhance consumer protection, fraud prevention and access to data. For FinTechs, particularly those operating as payment and e-money institutions, PSD3 introduces stricter authorisation requirements, stronger AML provisions and enhanced obligations around incident reporting and transaction transparency. In parallel, MiCA and DORA have now entered into force, imposing rigorous standards on cryptoasset service providers (CASPs) and digital infrastructure resilience, respectively. The cumulative effect of these measures is profound: FinTech firms are being driven to professionalise compliance functions, invest in cyber security and align their operations with EU-wide supervisory expectations – shaping both market entry strategies and long-term growth plans.

CANADA

Abudulai: The Retail Payments Activities Act requires payment services providers (PSPs) to register with the Bank of Canada and, as of September 2025, comply with funds safeguarding and operational and risk management obligations. PSPs are broadly defined and the performance of any one of five specified criteria, absent a prescribed exemption, will capture a FinTech as a PSP. To date, many FinTechs have submitted registration applications to the Bank of Canada. Canada’s AML and anti-terrorist financing regime has been expanded to include financing entities, such as BNPL FinTechs that meet the relevant criteria. FinTechs now subject to the regime have customer identification, reporting and record-keeping obligations and a requirement to establish a compliance programme.

AUSTRALIA

Clark: In Australia, recent and upcoming regulatory changes are significantly affecting the payments sector. Notably, the proposed amendments to the 1998 Payment Systems (Regulation) Act aim to expand the Reserve Bank of Australia’s powers, impacting how payment systems are regulated. Reforms related to AML and CFT legislation are reshaping how FIs perform customer due diligence and undertake transaction reporting. Other developments include the licensing of BNPL providers, and the passing of the Scams Prevention Framework. These changes require FinTech companies to update their systems and controls, modernise their approaches to compliance to reflect the relevant risks and engage proactively with regulators to navigate these transformations.

UNITED KINGDOM

Makarova: The new EU MiCA regulation is changing the landscape of FinTechs in the crypto space. In the UK, the FCA has published the ‘FCA Crypto Roadmap’ signalling that the next few years are likely to bring a tectonic shift to how the FCA approaches FinTech regulation.

SOUTH AFRICA

Reddy: Recent notable regulations impacting the FinTech sector include the declaration of cryptoassets as financial products under the FAIS Act and the extension of the Financial Intelligence Centre Act (FICA) to cover CASPs. These regulations have introduced stricter compliance requirements for FinTech companies dealing with cryptocurrencies, ensuring greater oversight and consumer protection. The FAIS Act mandates that cryptoasset providers must be licensed and adhere to specific conduct standards, while FICA requires CASPs to implement robust AML and CFT measures, and register with the Financial Intelligence Centre. These regulatory changes have increased operational costs for FinTech firms but have also enhanced the credibility and trustworthiness of the sector, potentially attracting more institutional investors and fostering a safer environment for consumers.

FW: How do you expect FinTech to evolve over the coming years? What issues are set to influence FinTech development in the months and years ahead?

MALTA

Zammit: In the coming years, FinTech is expected to evolve with the continued integration of AI, blockchain and automation across FS. The rollout of MiCA, DORA and the proposed PSD3/PSR framework will be pivotal, setting a harmonised foundation for payments, cryptoassets and operational resilience. These regulations will likely accelerate market consolidation, as firms must meet increasingly sophisticated compliance and risk management standards. We expect that the rise of decentralised finance will continue to challenge traditional banking structures, while digital currencies, including central bank digital currencies, are likely to play a significant role in reshaping the payment landscape. Regulators will increasingly focus on consumer protection, privacy, cyber security and AML measures as FinTech companies expand their services. The growing adoption of open banking will drive more collaboration between banks, FinTech firms and non-financial companies, enabling more seamless, personalised financial experiences. Overall, FinTech firms that embed regulatory readiness, innovation and responsible governance into their strategic models will be best positioned to thrive in the next phase of Europe’s digital finance landscape.

CANADA

Abudulai: As technology continues to evolve, most transactions, other than a limited number, will be virtual. Innovative products and services provided by FinTechs will transform the FS landscape as we know it, and will significantly influence how we transact and, ideally, foster a competitive environment benefitting consumers and businesses alike with opportunity. Key issues that will influence FinTech development include Canada’s upcoming federal election, economic turmoil due to the current geopolitical landscape, the development of Canada’s real-time payments rail, as well as legislative amendments concerning consumer protection, open banking and AI, which will all shape and influence FinTech development in the coming months.

AUSTRALIA

Clark: In the coming years, the FinTech landscape is poised for substantial evolution, driven by advancements in quantum computing and AI. As quantum computing matures, the payments industry will need to develop quantum-safe cryptographic solutions to protect transactions from security threats. Additionally, the ability to process and analyse large datasets at unprecedented speeds will enhance the detection of fraud, money laundering and other illicit activities, offering a significant leap forward in financial security. As FinTech firms continue to adopt these technologies, they will also need to address evolving regulatory frameworks, particularly those around privacy, data protection and consumer rights. The ongoing shift toward digital currencies, decentralised finance, and AI-driven FS will further transform how financial transactions are executed, with an increasing emphasis on transparency, speed and consumer empowerment.

UNITED KINGDOM

Makarova: FinTech and digital assets will grow and become more sophisticated, including through the use of advanced technology, such as LLMs and AI. At the same time, regulators will continue focusing on the sector, resulting in tighter regulation and more rules for the FinTech firms that aim to develop and grow. In a way, the FinTech sector is likely to become as regulated as the mainstream FS sector, with regulators also potentially choosing to introduce even tighter rules for certain markets, such as crypto.

SOUTH AFRICA

Reddy: The trend toward digital FS, such as digital payments, mobile wallets and online banking, is expected to grow due to their convenience and security. It is likely that the synergy between traditional banks and innovative FinTech firms will ‘reshape’ banking by leveraging the strengths of both sectors to offer enhanced FS, improve customer experiences and harness cutting-edge technology. Regulatory frameworks will continue to evolve, governing emerging technologies and financial products, with the current draft Conduct of Financial Institutions Bill being one to watch. Finally, the use of AI and data analytics will likely become more prevalent, offering personalised services and improved risk management.

SINGAPORE

Liew: Apart from regulatory developments, we expect the key drivers for FinTech development in the upcoming months to include technological advancements, such as rapid advancements in AI, blockchain and cloud computing, which will drive innovation and create new opportunities for FinTech companies. As technology evolves, and we understand the risks associated with emerging technologies better, we also expect this to drive increasing regulatory compliance and standards. Consumer expectations are also likely to be impacted, with changing consumer preferences for digital and personalised FS pushing FinTech companies to innovate and enhance their offerings. Finally, depending on global economic conditions, the highly competitive FinTech sector will require companies to differentiate themselves through unique value propositions and superior customer experiences.

Suhuyini Abudulai is a partner at Borden Ladner Gervais LLP where she advises clients, including financial institutions and FinTechs, on transactional and regulatory compliance matters in financial services, including consumer protection, payments, anti-money laundering, sanctions, financial institution regulation and other regulatory requirements. She can be contacted on +1 (416) 367 6732 or by email: sabudulai@blg.com.

Ying Yi leads the financial services regulatory practice at CMS Holborn Asia. She specialises in advising a wide range of financial institutions, including banks, fund managers, brokers, financial advisers, insurers, market operators and commodity traders, as well as FinTech companies such as e-commerce platforms, robo-advisers, crowdfunding platforms, blockchain companies and payment solutions providers, on evolving financial regulations. She can be contacted on +65 6422 2855 or by email: yingyi.liew@cms-holbornasia.com.

Yulia Makarova specialises in UK and European Union regulation covering a broad range of financial regulatory matters, with a particular focus on FinTech and digital assets. She counsels financial institutions – including technology companies, payment services providers, banks, financial advisers, investment firms, investment managers, private equity and sovereign wealth funds, and venture capital firms – on a broad spectrum of regulatory issues. She can be contacted on +44 (0)20 7556 4608 or by email: ymakarova@cooley.com.

Andrew J. Zammit is the managing partner at GVZH Advocates, specialising in corporate law, financial services and technology regulation. With extensive experience advising multinational clients, he provides strategic legal solutions across various industries. He is actively involved in regulatory developments and business law initiatives in Malta. He can be contacted on +356 2122 8888 or by email: andrew.zammit@gvzh.mt.

Sophie Anne Clark is a senior advisor in the risk advisory team at Norton Rose Fulbright Australia, based in Sydney. She is a payments and financial services lawyer with over 10 years’ experience in the legal industry. She has held senior in-house positions at leading payments and FinTech companies in both Australia and Singapore. She can be contacted on +61 2 9330 8178 or by email: sophie.clark@nortonrosefulbright.com.

Desiree Reddy is a financial regulatory lawyer with over 20 years’ experience. As the head of the Norton Rose Fulbright South Africa FinTech practice and a key member of the firm’s global FinTech team, she has cultivated a deep understanding of blockchain, central bank digital currencies and cryptocurrencies. She provides strategic advice to start-ups and financial institutions on the deployment of these cutting-edge technologies. She can be contacted on +27 (11) 685 8673 or by email: desiree.reddy@nortonrosefulbright.com.

© Financier Worldwide

THE PANELLISTS

CANADA

Suhuyini Abudulai

Borden Ladner Gervais LLP

SINGAPORE

Ying Yi Liew

CMS Holborn Asia

UNITED KINGDOM

Yulia Makarova

Cooley (UK) LLP

MALTA

Andrew J. Zammit
GVZH Advocates

AUSTRALIA

Sophie Anne Clark

Norton Rose Fulbright Australia

SOUTH AFRICA

Desiree Reddy

Norton Rose Fulbright South Africa Inc