Fintech Compliance in 2026: A Practical Guide for Product Teams

Anna Ivakhnik

People often think of regulatory compliance as a checklist for lawyers to tick off. In fintech, however, the reality is messier. Compliance encompasses both product capability and operational discipline. Each new payment feature, lending model, or crypto integration can alter your licensing obligations, introduce extra anti-money laundering (AML) and privacy regulations, and prompt oversight from sponsor banks, card schemes, and regulators in various jurisdictions. While cutting corners may save engineering cycles initially, deferred compliance often manifests as product rewrites, urgent remediation projects, or blocked partnerships later on. Starting in 2025, regulators became more proactive. On January 17, 2025, the EU’s Digital Operational Resilience Act (DORA) took effect, bringing ICT resilience and third-party oversight to the center of financial regulation. In the US, AML enforcement actions and fines continued to increase, with regulators emphasizing outcome-based supervision. Therefore, fintech teams must treat compliance as a core capability that evolves with their product roadmap, not an afterthought.

This article explains what "fintech compliance" means in practice, how obligations differ by product model and geography, the core domains teams must design for, and how to build compliance into products without slowing down. It offers a phased rollout plan and a concise checklist for leaders. This article is not legal advice. Always consult qualified counsel for specific regulatory requirements.

The fintech compliance landscape – obligations vary with your product

Fintech products span a wide range of regulated activities, and the specific compliance regime depends on what you do and where you operate. Some examples:

• Payments and Electronic Money Institutions (EMI) – Companies handling consumer or business payments must comply with PSD2/PSD3 in the EU, implement Strong Customer Authentication (SCA) for transactions over €30, protect cardholder data under PCI DSS v4.0 (mandatory since 31 March 2024) and report major operational incidents to regulators. Licensing and capital requirements differ between payment institutions and EMI.
• Card issuance and acquiring – Card programmes require adherence to network rules (e.g., Visa/Mastercard), PCI DSS scope definition, tokenisation and secure software development. Issuers using sponsor banks must meet bank partner audit and risk management expectations. SCA applies to card‑not‑present transactions in Europe.
• Lending and credit – Lenders must comply with consumer credit laws, fair lending requirements, AML/CFT rules and, in many jurisdictions, supervisory reporting. Underwriting models need explainable criteria to avoid discrimination, and servicing must include clear disclosures and complaints handling.
• Wealth/robo‑advisory – Products offering brokerage, investment advice or asset management trigger securities laws, suitability requirements, market abuse controls and custody regulations. Record‑keeping and best‑execution obligations add to the data trail.
• Crypto/virtual asset services – Exchanges and custody providers face heightened AML, sanctions screening and travel rule obligations. Licensing regimes vary widely: the EU’s Markets in Crypto‑Assets Regulation (MiCA) introduces uniform rules, while the US continues to regulate via state money‑transmitter licences and securities/commodities enforcement.
• Embedded finance and Banking‑as‑a‑Service (BaaS) – Platforms embedding financial services into non‑financial contexts must manage dual compliance: their own operations and those of the partner brands using the service. Sponsor banks expect robust AML/KYC programmes, vendor risk management and clear separation of funds.

Geography also matters. EU businesses must align GDPR-style data protection with DORA’s ICT risk management. UK firms must comply with Financial Conduct Authority (FCA) rules and the Consumer Duty. US fintechs must follow the Bank Secrecy Act (BSA) requirements and often partner with federally regulated banks. Israeli startups need Bank of Israel licensing and must adapt to local privacy laws. Your compliance plan should start with clearly mapping the licenses, regulatory regimes, and cross-border obligations relevant to your business model.

The Big 6 compliance domains fintech teams must design for

The following domains capture most of the operational burdens faced by fintechs. They map directly to architectural patterns and operational responsibilities.

1. AML/KYC & sanctions

AML compliance is not just a "checkbox." According to FinTech Global, anti-money laundering is now a primary risk control that determines whether a financial institution thrives or faces severe enforcement action. Weak AML controls can result in sudden financial losses, regulatory penalties, and reputational damage. In practice, AML programs must:

• Identify customers – Implement customer identification programmes (CIP) that capture government‑issued IDs and biometrics where permitted. Under U.S. law, institutions must monitor accounts and file suspicious activity reports (SARs).
• Verify beneficial ownership – Collect information on corporate owners and control persons to prevent shell companies from abusing your platform.
• Perform risk‑based CDD/EDD – Apply EDD to high‑risk customers (e.g., high transaction volumes, high‑risk jurisdictions) and maintain ongoing monitoring.
• Screen against sanctions and PEP lists – Use automated screening to check customers and counterparties against sanctions lists (OFAC, EU, UK, UN) and PEP databases. Screening must run at onboarding and periodically thereafter.
• Monitor transactions and report – Build rules and machine‑learning models to detect anomalous patterns, such as rapid inflows and outflows, structuring and unusual cross‑border transfers. Regulators expect timely SARs and clear audit evidence.

2. Fraud & strong authentication

Fraudsters exploit weaknesses in identity and payment flows. PSD2’s Strong Customer Authentication requires two independent factors (knowledge, possession, inherence) for transactions over €30, but exemptions exist for low‑value, recurring and low‑risk transactions. Teams should design adaptive authentication:

• Step‑up flows – Begin with frictionless authentication (e.g., device fingerprint), then require additional factors (OTP, biometrics) when risk signals indicate potential fraud or when transactions exceed thresholds.
• Continuous identity monitoring – Use behavioural biometrics and device signals to detect account takeover and synthetic identities. Monitor for mule accounts by analysing receiving patterns and linking accounts via device and IP signals.
• 3‑D Secure 2.0 – Adopt card network protocols that enable risk‑based authentication and shift liability for fraud when authentication is successful.

3. Data privacy & residency

GDPR and similar frameworks require fair and lawful processing, purpose limitation, data minimisation and storage limitation. These principles often collide with AML laws, which require storing KYC and transaction records for five years. The DPO Centre notes that firms that keep data “just in case” or repurpose KYC data for unrelated marketing breach privacy principles. To balance these obligations:

• Define lawful bases – Document the legal basis (e.g., compliance with legal obligations) for processing personal data in AML/KYC workflows.
• Set retention schedules – Align retention periods with AML record‑keeping requirements (typically five years) and securely delete data beyond that period.
• Perform DPIAs – For high‑risk processing such as biometric verification or large‑scale transaction analysis, Article 35 GDPR mandates a Data Protection Impact Assessment to identify risks and safeguards.
• Implement data boundaries – Segregate production data by region, use encryption and pseudonymisation to meet residency laws, and ensure cross‑border transfers rely on approved mechanisms (standard contractual clauses, adequacy decisions).

4. Payment security (PCI DSS)

PCI DSS v4.0 modernises card security requirements. BDO summarises the timeline: v4.0 was released 31 March 2022, organisations could use v3.2.1 until 31 March 2024, and future‑dated requirements become mandatory after 31 March 2025. Key focus areas include:

• Define your cardholder data environment – Identify all systems that store, process or transmit cardholder data, and reduce scope through tokenisation and third‑party vaults.
• Strong access controls and encryption – Implement multi‑factor authentication for administrative access, role‑based access controls, and encryption of card data in transit and at rest.
• Secure software development lifecycle – Incorporate code reviews, vulnerability scanning and penetration testing into your development pipeline; remediate findings promptly.
• Continuous monitoring and incident response – Collect logs from payment gateways, card processing and tokenisation services; enable real‑time alerts for anomalies; maintain a breach response plan that meets card network and regulatory notification requirements.

5. Operational resilience & third‑party risk

DORA positions operational resilience as a non‑negotiable capability. It harmonises ICT risk management across EU financial entities by requiring defined roles, documented ICT asset inventories, incident reporting and resilience testing. It applies to banks, payment institutions, investment firms, insurers, crypto‑asset service providers and their ICT third‑party providers. Practical obligations include:

• ICT risk management framework – Maintain inventories of ICT assets, define risk appetites, implement protection (access controls, encryption), detection (monitoring), response and recovery measures.
• Incident reporting – DORA introduces a three‑phase reporting process (initial, intermediate and final reports) for major ICT incidents. Your architecture must support quick detection and structured data capture to meet tight reporting deadlines.
• Resilience testing – Entities must conduct vulnerability scans, penetration tests and threat‑led penetration testing (TLPT) every three years for significant entities.
• Third‑party risk management – Financial entities must keep an updated register of ICT third‑party service providers, conduct due diligence, include audit and inspection rights in contracts, specify termination conditions and exit strategies. They should also tier vendors based on criticality and perform regular recovery and contingency tests.

Although DORA is EU-specific, similar expectations are emerging globally. For example, US regulators emphasize third-party oversight in the Office of the Comptroller of the Currency (OCC) guidance, and the Monetary Authority of Singapore (MAS) has introduced "Technology Risk Management" guidelines. Regardless of jurisdiction, fintechs should treat third-party management as a core competence by mapping dependencies, monitoring vendor security posture, and including resilience clauses in contracts.

Check out a related article:
The Digital Evolution of Financial Services

6. Auditability & evidence

Audits are no longer episodic. Fraxtional’s audit checklist stresses that auditors will ask whether your controls actually work, whether ownership is clear and whether you can show evidence via real‑time logs, approval records and audit trails. Audit failures often arise because controls are documented but not operated consistently. To build “prove‑it” readiness:

• Implement immutable logging – Centralise logs across onboarding, transaction monitoring, authentication and admin actions; ensure logs cannot be tampered with and are retained in line with retention policies.
• Automate evidence collection – Use tooling to capture code reviews, test results, access approvals and policy‑as‑code artefacts. Provide dashboards that map controls to evidence.
• Assign clear ownership – Each control area should have a named owner, escalation path and closure process for findings. Shared responsibility without clear accountability leads to repeat findings.
• Continuous auditing – Conduct internal control testing and readiness reviews before external audits. Link risk assessments to product changes to ensure controls evolve with the business.

Compliance‑by‑design architecture: patterns that reduce audit pain

Building compliance into your architecture from day one reduces rework and audit friction. Practical patterns include:

Data boundaries and segmentation – Isolate regulated data (cardholder data, personal data, transaction logs) into dedicated storage with strict access controls. Use microservices or domains to separate financial flows (e.g., ledger, fraud engine, user profiles) and apply the principle of least privilege. Data boundaries make it easier to demonstrate PCI DSS scope, GDPR data mapping and DORA asset inventories.

Event‑driven compliance – Treat compliance events (onboarding submissions, sanctions hits, fraud signals) as first‑class events published to a message bus. A central compliance service subscribes to these events, evaluates rules and writes decisions to an audit log. This decouples product flows from compliance logic, enabling asynchronous processing and real‑time monitoring.

Policy‑as‑code – Encode AML rules, risk scoring and authentication flows in configuration or code that is version‑controlled and testable. Using a policy engine (e.g., Open Policy Agent) allows you to update controls without redeploying core services. Policy‑as‑code also facilitates automated testing and evidence collection.

Least privilege & admin controls – Enforce role‑based access control (RBAC) across infrastructure and applications. Use just‑in‑time access for production data, multi‑factor authentication for privileged accounts and segregation of duties between developers, operators and compliance officers. Implement approval workflows for changes to customer data or transaction limits.

Vendor containment – Design integration layers that encapsulate third‑party services behind controlled APIs. For example, tokenise card numbers before sending them to processors, and ensure that embedded finance partners cannot directly access core ledgers. Maintain a vendor registry and track dependencies.

Immutable audit trails – Centralised logging, event sourcing and tamper‑evident storage enable auditable histories. Tools like append‑only log streams or blockchain‑backed audit records provide cryptographic assurance that logs haven’t been modified.

Operating model: people and process

Architecture alone does not guarantee compliance; you need a robust operating model.

Roles and three lines of defence

• First line (product and engineering) – Own day‑to‑day compliance execution. Product managers and engineers incorporate regulatory requirements into design, implement AML rules, authentication flows and logging. They operate controls and respond to alerts.
• Second line (compliance and risk) – Provide subject‑matter expertise, interpret regulations, design policies and monitor controls. They review escalations from the first line, coordinate suspicious activity reporting and manage regulator communications.
• Third line (internal audit) – Independently test that controls operate as intended and report findings to the board. This line challenges both product teams and compliance officers and ensures continuous improvement.

Clear RACI (Responsible, Accountable, Consulted, Informed) matrices help clarify ownership, prevent gaps and accelerate decision‑making. Board‑level oversight and risk committees align compliance with business strategy.

Lightweight governance and release gates

• Risk‑based release gates – Embed compliance reviews into product development. For low‑risk features (e.g., UI changes), automated checks may suffice. For high‑risk changes (e.g., new payout flows), require approvals from compliance and security.
• Change management – Document and approve changes to critical systems; maintain version‑controlled policies; ensure rollback plans. Resist the temptation to override controls under time pressure.
• Training and culture – Provide regular training on AML, data protection, incident response and audit readiness. Promote a culture where raising compliance concerns is rewarded, not punished.

Rollout roadmap: 90 days → 6 months → 12 months

A phased approach balances urgency with practicality.

Within 90 days

1. Map obligations and gaps – Identify your regulated activities, jurisdictions and licences. Perform a gap analysis against the Big 6 domains. Start building a register of all ICT assets and vendors (DORA) and document your cardholder data environment (PCI).
2. Appoint a compliance owner – Designate a senior person to own compliance and risk, empower them to make decisions and allocate budget.
3. Implement basic controls – Enable two‑factor authentication for internal systems; integrate a sanctions screening provider; start capturing logs in a central system; implement secure coding practices.
4. Select partners wisely – Perform due diligence on key vendors (payments processor, KYC provider, cloud hosting). Ensure contracts include audit rights and exit clauses.

Within 6 months

1. Launch AML/KYC programme – Deploy a KYC workflow with document verification, PEP/sanctions screening and risk scoring. Implement transaction monitoring rules and begin filing SARs where required.
2. Enable SCA & fraud controls – Integrate 3‑D Secure 2.0 and design step‑up authentication flows. Deploy device fingerprinting and behaviour analytics.
3. Establish privacy & retention policies – Conduct DPIAs for high‑risk processes, define retention schedules that balance AML obligations and data minimisation. Implement encryption and pseudonymisation.
4. Develop resilience & incident response plans – Create business continuity and disaster recovery runbooks; test incident response; define internal/external communication plans (DORA reporting). Start conducting penetration tests and vulnerability scans.
5. Formalise governance – Set up a risk committee; define RACI for controls; implement change‑management processes and risk‑based release gates.

Within 12 months

1. Achieve PCI DSS compliance – Complete full PCI DSS v4.0 assessment, implement future‑dated requirements (e.g., targeted risk analyses, anti‑phishing controls) before the March 2025 deadline.
2. Expand monitoring and analytics – Apply machine learning to transaction data for smarter AML and fraud detection; invest in continuous auditing tools that collect evidence automatically.
3. Conduct independent audits – Engage external auditors to test controls; address findings; demonstrate to sponsor banks and investors that you operate a mature compliance programme.
4. Refine third‑party risk management – Tier vendors by criticality, perform deeper assessments, and test exit strategies. Align your register and resilience testing with DORA guidelines.
5. Scale governance – As the business grows, revisit your risk assessment and control design. Expand the compliance team, introduce specialised roles (e.g., Data Protection Officer, MLRO) and embed compliance into product planning.

Compliance checklist for CTOs and product leaders

1. Determine your licensing status – Are you a payments institution, EMI, broker, lender or unregulated platform? Confirm jurisdiction‑specific licences.
2. Design KYC onboarding – Collect ID and beneficial ownership data; implement risk‑based due diligence and sanctions screening.
3. Deploy continuous transaction monitoring – Use rules and analytics to detect suspicious patterns and file reports.
4. Integrate SCA and adaptive authentication – Ensure two‑factor authentication for payer‑initiated transactions over €30 and implement exemptions strategically.
5. Map your data – Know what personal data you hold, where it’s stored, which vendors process it and how long you retain it. Align retention periods with AML and privacy obligations.
6. Secure the CDE – Scope and document your cardholder data environment; apply encryption, segmentation and tokenisation; schedule penetration tests.
7. Draft and test incident response plans – Include detection, escalation, reporting and remediation; align with DORA’s incident classification and reporting timelines.
8. Build an ICT asset and vendor register – Document all third‑party service providers, their roles and contractual terms; ensure audit rights, termination clauses and exit strategies.
9. Enable real‑time logging and audit trails – Capture logs and approval records for critical events; ensure immutability and searchable storage.
10. Establish clear ownership – Assign control owners, escalation paths and remediation processes; embed compliance reviews into your development pipeline.
11. Conduct regular risk assessments – Update your risk profile as you launch new products, enter new geographies or onboard new partners; adjust controls accordingly.
12. Train your teams – Provide ongoing training on AML, fraud, data protection, PCI DSS and operational resilience; create a culture where compliance is everyone’s job.

Closing: compliance as a growth lever

Although regulatory compliance may feel like a burden, by 2026, it will also be a strategic asset. With DORA emphasizing operational resilience, PCI DSS focusing on security, and AML enforcement being heightened, investors, banks, and partners increasingly view compliance maturity as an indicator of organizational health. Clean audits and robust controls simplify sponsor bank relationships, accelerate partner onboarding, and enable market expansion. Strong AML and fraud controls reduce losses and protect customers, and privacy-by-design builds trust and reduces regulatory friction. Instead of treating compliance as a cost center, fintech leaders should view it as a product capability that differentiates their platform, shortens sales cycles, and enables sustainable growth.