The word "compliance" is often seen as a cost centre, a drag on innovation, and a source of endless checklists. But the real friction isn’t in the regulations themselves, but in the collision between those rules and the software that runs the business.
Many fintech firms and financial institutions/PSPs that achieved rapid growth now find themselves at a difficult crossroads. The software that powered their initial success is often ill-equipped to handle the demands of today's regulations. The result is not a patch or update, but a necessary, and often extensive, rebuilding of core software components.
This isn't a sign of failure, but an inevitable consequence of a maturing industry where governance and technology are inextricably linked. As former U.S. Comptroller Keith Noreika noted, weak governance "finds its way onto the balance sheet," a risk no modern fintech can afford.
Patches are designed to fix minor, isolated problems. Regulatory compliance, however, is rarely an isolated issue. It introduces systemic, cross-cutting concerns that touch multiple parts of an application, from data intake and storage to transaction processing and user authentication.
Consider Anti-Money Laundering (AML) and Know Your Customer (KYC) requirements. These aren't simple flags in a database. They require a verifiable and auditable process for identity verification, transaction monitoring, and reporting suspicious activity. In a legacy monolithic system, customer data, transaction logs, and risk scoring might be tightly coupled. Implementing a new AML rule could require untangling this logic, a task so complex that it’s often faster and safer to build a new, separate service than to perform changes on the core product.
Furthermore, regulations often impact the very foundation of how software is developed, tested, and deployed. They demand auditable trails—proof that the process itself is compliant. This means changes to the build and release pipeline, integrating automated checks, and ensuring every step is logged. Patching the final application does nothing to address these fundamental process requirements.
Data is the lifeblood of fintech, but regulations like the GDPR and the California Consumer Privacy Act (CCPA) have transformed it into a liability if not managed properly. These regulations grant consumers rights, such as the right to access, portability, and erasure of their data.
For a software system, fulfilling a "right to erasure" request isn't as simple as running DELETE FROM users WHERE id=123. The user's data may be scattered across multiple tables, databases, log files, and even third-party analytics services. In older systems, this data is often not centralised, making it nearly impossible to guarantee complete removal.
This forces a move toward architectures where customer data is managed as a distinct entity. Many firms are forced to re-engineer their data layer, often creating a centralised "customer data vault" microservice.
This service becomes the single source of truth for all personally identifiable information (PII), handling all requests for access, modification, and deletion of this information. While this is a significant architectural undertaking, it’s the only viable way to ensure compliance and avoid the fines and reputational damage associated with a breach.
For ambitious fintechs, global expansion is a primary goal. However, each jurisdiction has its own set of rules covering everything from data residency (where data must be stored) to local payment-processing standards. A platform built for the U.S. market may be fundamentally non-compliant in the European Union or Asia.
This is an example of where monolithic architecture breaks down. If your application assumes all data can be stored in a single U.S.-based data centre, you cannot simply "patch" it to support a German law requiring citizen data to remain within Germany. This requires a fundamental re-architecture to support multi-jurisdictional data storage and processing.
Successful global platforms are often built on a multi-tenant or cell-based architecture. Each region or "cell" can have its own isolated database and application instances, configured to comply with local regulations and data protection requirements.
While this is a complex model to build and manage, it allows the company to "turn on" new regions without rebuilding the entire platform from scratch each time. It’s a strategic investment in future growth, transforming compliance from a blocker into a managed and scalable process.
The regulatory landscape is not static; it evolves continuously. To avoid a reactive and expensive cycle of rebuilding, firms must shift their mindset from periodic compliance audits to "continuous compliance". This means embedding compliance into the software development lifecycle (SDLC) itself.
This approach involves several technical strategies:
Automated Compliance Checks: Integrating computerised tools into the Continuous Integration/Continuous Deployment (CI/CD) pipeline can catch compliance issues early, long before they reach production. These tools can scan for security vulnerabilities, enforce coding standards, and check for adherence to data privacy rules.
Policy as Code (PaC): This practice involves defining compliance policies in a machine-readable format, enabling automated enforcement and management. These policies are then automatically enforced within the development environment. For example, a policy could prevent developers from using a library with a known critical vulnerability or logging customer data in plain text.
Platform-Centric Approach: A dedicated platform team can provide developers with pre-approved, compliant infrastructure and services (e.g., databases, authentication systems). This frees application developers from becoming compliance experts and ensures consistency across the organisation. According to a 2024 report from Puppet, companies with a platform team report that it has helped them become more compliant.
Navigating the transition from legacy systems to compliant, modern architectures requires a rare blend of financial domain knowledge and deep software engineering skills. This is where an experienced technology partner becomes invaluable. Rather than simply outsourcing a problem, a collaborative partnership allows a fintech to augment its team.
Working with Ximedes provides the architectural foresight and hands-on expertise needed to execute these complex rebuilds successfully. This co-creation model ensures that the new systems are not only compliant by design but also scalable and maintainable, empowering the in-house team to focus on core product innovation rather than the intricacies of regulatory-driven engineering.