Fintech companies are facing significant challenges in their international expansion efforts, primarily due to a fragmented regulatory environment, according to a recent study aimed at highlighting the importance of international finance centres (IFCs).
Conducted by BVI Finance, the organization that promotes the British Virgin Islands’ financial sector, the report reveals that an overwhelming 94% of fintech firms deem cross-border growth essential to their success. However, nearly 39% identified regulatory changes and compliance as a geopolitical trend that critically impacts their operations.
Furthermore, over a quarter of the respondents (28%) indicated that navigating these regulatory hurdles constitutes a major challenge, which becomes increasingly complex when dealing with different markets, each possessing its own regulatory frameworks.
The inconsistencies outlined in the report contribute to operational inefficiencies and additional costs. It also emphasizes the vital role that IFCs, such as the BVI, can play in attracting fintech companies with global aspirations. The survey found that almost two-thirds (63%) of the 451 participating firms are already operating within an IFC, citing streamlined regulations as a major benefit.
Additionally, fintech firms are increasingly taking into account access to international markets when choosing their incorporation jurisdictions, with 32% citing this as a key factor.
This report emerges at a crucial juncture for fintech regulation, especially as varying approaches among jurisdictions become more apparent. For instance, the United States has recently implemented the Genius Act for the stablecoin sector, while the European Union and UK regulators have shown a preference for Central Bank Digital Currencies, emphasizing different regulatory priorities.
“Fintech companies represent a new breed of business, and operating across borders is non-negotiable,” stated Elise Donovan, CEO of BVI Finance. “However, this also makes their business models vulnerable to regulatory changes and discrepancies across markets.”
Donovan further underscored the importance of regulatory certainty for the growth of fintech and cryptocurrency enterprises, noting that predictable licensing, clear regulation enforcement, and cross-border recognition facilitate strategic long-term planning, allowing these companies to focus on delivering innovative products and services to their customers swiftly.