How banks are being pushed to innovate at fintech speed without compromising compliance

Banks are being pushed to match fintechs’ speed of innovation largely by rising digital expectations, competitive pressure from nimble startups, and rapid advances in AI and cloud – but they are managing the compliance risk through heavy investment in regtech, observability, and structured partnerships with fintechs rather than trying to “move fast and break things.”

What is driving “fintech speed”?

• Customers now expect real‑time, app‑like banking experiences with high personalization and zero downtime, so banks are judged by the same standards as big tech platforms.​

• Fintechs release new features in weeks, not years, forcing traditional institutions to accelerate digital transformation to remain competitive.

• AI and automation have moved from experiments to core drivers of competitive advantage in banking, pushing institutions to integrate these technologies quickly into front‑ and back‑office processes.

Why compliance pressure is increasing

• Regulators have intensified scrutiny of both banks and fintechs, especially around AML, KYC, and consumer protection, with recent enforcement actions showing the cost of rapid growth without robust controls.

• Guidance from bodies such as the Basel Committee links fintech developments to banks’ safety, soundness, and financial stability, making supervisors more focused on how new technologies are governed.​

• As banks adopt more third‑party and cloud services, regulators expect clear oversight of outsourcing, data protection, and operational resilience, raising the bar for compliant innovation.

Key levers: regtech, observability, and automation

• Regulatory technology (regtech) uses AI, data analytics, and automation to handle AML/KYC checks, monitoring, and reporting in seconds, reducing manual effort while improving accuracy and auditability.

• End‑to‑end observability across complex, layered stacks lets banks deploy changes faster while continuously tracking performance, security, and compliance impacts, turning “move fast” into “move fast with full visibility.”​

• Consolidating tools into unified platforms (e.g., single‑pane compliance dashboards and observability suites) helps reduce blind spots, support real‑time risk scoring, and align engineering, risk, and compliance teams.

Bank–fintech collaboration models

• Many banks now partner with fintechs for payments, digital wallets, BNPL, and embedded finance, using their own mature risk and compliance frameworks as a “wrapper” around agile fintech technology.

• Fintechs gain scale, licenses, and regulatory credibility from banks, while banks gain speed, modern APIs, and superior user experiences – a symbiotic model that makes innovation and compliance mutually reinforcing.

• Sponsor‑bank arrangements and accelerator programs (such as growth programmes run by large banks) formalize shared responsibility for compliance, with banks acting as advisors and control owners while fintechs innovate on top.

Emerging practices to balance speed and safety

• Embedding compliance “by design” into product development (e.g., automated policy checks, model validation workflows, and pre‑approved control patterns) allows teams to ship features quickly without re‑litigating basic requirements each time.

• Continuous monitoring of customer behaviour, transactions, and system health using AI models helps catch fraud, AML issues, or system weaknesses early, reducing the risk that rapid change leads to regulatory breaches.

• Treating observability and regtech as mission‑critical infrastructure, not back‑office tools, enables banks to operate in a “dual‑speed reality”: front‑end innovation at fintech pace and back‑end controls at regulator grade.

If helpful, a follow‑up can go into concrete examples of architectures, operating models, or specific regtech capabilities that best support this balance.