Going global: getting to market faster by avoiding regulatory pitfalls
The problem most scaling fintechs hit (and why “what worked at home” doesn’t work abroad)
Ambitious business-to-business (B2B) fintechs see demand from business customers in new geographies and want to rapidly switch on payments, FX, cards, wallets, lending, and stored value in multiple countries. The obstacle isn’t technology; it’s that each jurisdiction defines these activities differently and imposes its own licensing, safeguarding, marketing, AML/CFT, and privacy expectations. There is no single “international fintech licence.” What lets you move quickly in one market can slow (or stop) you in the next.
Two roads to market: embedded/partnered vs directly regulated
Most B2B fintechs face a strategic fork:
1) Embedded/partnered model
Integrate with regulated providers (banks, e-money/payment institutions, PSPs) who hold the licences and perform core regulated functions (e.g., holding/safeguarding client funds, executing payments, issuing cards). You provide the software and customer experience; your partners provide regulated rails.
Why it works
Faster entry and fewer licences on day one.
Your partner carries key regulatory and safeguarding obligations.
Regulators recognise and understand the model.
What still lands on your plate
Contracting: pass-through terms, allocation of responsibilities, audit rights, data-sharing, service levels, incident response, and termination migration plans.
Distribution: your sales and marketing must stay within permissions (no unlicensed financial services or holding out).
AML/KYC: even if your partner is the reporting entity, you’ll often collect KYC/KYB data, perform sanctions screens, and follow onboarding procedures under reliance or outsourcing arrangements.
Data: cross-border transfers, subprocessor governance, breach notification flows.
2) Directly regulated model
You obtain licences/registrations and perform regulated activities yourself (often still with banks, e-money/payment institutions, PSPs as vendors under you).
Why it works
Control over product features, economics, and roadmap.
Independence from financial partner risk appetite and queue times.
What it requires
Time and capital to license, build compliance functions (AML/CTF, safeguarding, ops risk, complaints, governance), and meet supervisory expectations.
A multi-year regulatory “ops muscle”: second line oversight, management information/metrics, audits, procedures, training, and local board engagement.
Market-by-market: what changes as you cross borders
United States
The question: Are you conducting “money transmission” at the state level, or can you ride a sponsor bank/bank-as-a-service (BaaS) or agent-of-the-bank model?
Money transmitter licences (MTLs): If you receive money or monetary value for transmission (including many wallet, stored value, and FX flows), you likely need 40+ state licences. Each state’s definition differs; exemptions vary (agent of payee, payment processor, bank agent).
Sponsor bank / agent-of-bank: Many B2B fintechs avoid MTLs by structuring so the bank is the “holder of funds” and the regulated actor executing payments and issuing cards. You then serve as the bank’s program manager/technology provider.
Cards/issuing: Issuing typically requires a sponsoring bank; network and processor rules drive compliance, program controls, and marketing guardrails.
AML/CFT: If you are an MSB (money services business), FinCEN registration plus a full AML programme is required (KYC/KYB, sanctions screening, SARs, independent testing). Even if you’re not the MSB, expect robust AML obligations via contract with your bank/PSP.
Red flags
Safeguarding by label: US doesn’t use “safeguarding” like the UK and other jurisdictions, but client funds handling is heavily scrutinised; commingling or unclear flow-of-funds invites enforcement and sponsor bank pushback.
Financial promotions: Statements implying FDIC insurance outside its scope, or suggesting you’re a bank when you’re not, are high-risk.
Contractor model pitfalls: Using contractors to perform KYC or compliance tasks without adequate supervision can be seen as unregistered activity-by-proxy.
United Kingdom
The question: Are you a payment/e-money institution (directly regulated) or distributing on behalf of one under the Payment Services Regulations (PSRs) and the Electronic Money Regulations (EMRs)?
Direct authorisation:
Payment Institution (PI) for payment services; EMI for stored value/e-money.
Safeguarding: Segregation or insurance guarantees for relevant funds; reconciliation, audit, and wind-down planning are core.
Open banking: AISP (account information) and PISP (payment initiation) permissions under PSRs if you want those features.
Partner model: Distribute as an agent or via a principal’s permissions. You still need strong oversight and operational controls per FCA expectations.
Financial promotions: Even B2B messaging is regulated if it invites or induces regulated activities. Approval, fair/clear/not misleading standards, and record-keeping apply.
Red flags
Safeguarding hygiene: Late or inaccurate reconciliations, unclear “relevant funds,” or weak acknowledgement letters are recurring enforcement grounds.
Advice vs information: Product claims that stray into recommendations can trip promotion rules, especially around FX and yield-like features.
Change-in-control/new activity: Material business changes can require FCA notifications—don’t “ship first, notify later.”
Canada
The question: Are you a Retail Payment Activities Act (RPAA) payment service provider (PSP) and/or a FINTRAC-regulated MSB, or are you partnering under someone else’s RPAA scope?
RPAA: Federally overseen by the Bank of Canada. Registration plus ongoing obligations for in-scope PSPs providing payment functions (e.g., holding funds, initiating or authorising payment instructions, clearing/settlement messaging). Core duties: operational risk management, incident reporting, end-user funds safeguarding (if applicable), and notices of significant change.
FINTRAC MSB/FX: If you’re doing money remittance, FX dealing, or similar, FINTRAC registration and a full AML compliance programme apply (risk assessment, KYC/KYB, record-keeping, reporting, independent review). Some entities are both RPAA PSPs and FINTRAC MSBs.
Partner model: Many fintechs rely on Canadian banks/regulated PSPs to perform regulated functions while they handle onboarding UX and integration.
Red flags
Dual regime confusion: RPAA (operational risk/safeguarding/incident reporting) and FINTRAC (AML) are separate. Being exempt from one does not exempt you from the other.
Incident definitions: “Incidents” under RPAA can include significant system disruptions or data breaches—be ready to classify and notify quickly.
Marketing to businesses with consumer overtones: Avoid claims or features that look consumer-protection facing if you’re B2B-only; it invites supervisory questions.
French language: Complying with legislative requirements to offer your services in the French language when servicing customers in Quebec, which accounts for roughly 20% of Canada’s population. Language translation is a costly and time consuming endeavour that must not be underestimated.
Australia
The question: Are you arranging for a licensed provider (common under an AFSL principal–CAR model) or seeking your own AFSL to provide non-cash payment, FX, or stored value services?
AFSL and CAR model: Common for B2B distributors of payments/FX to operate as a Corporate Authorised Representative (CAR) of an AFSL holder. You can “arrange” for clients to access the AFSL holder’s services; you must avoid giving financial product advice if not authorised.
“No-advice” distribution: Stick to factual information (features, fees, processes). Avoid recommendations or opinions about suitability.
Design & Distribution Obligations (DDO): Primarily a retail-client regime. Many B2B programmes fall outside DDO, but small businesses can sometimes be “retail” depending on product and thresholds—verify your target market determination (TMD) position with your principal.
AUSTRAC/AML: If you provide designated services (e.g., remittance, stored value facilities), AUSTRAC registration and a full AML/CTF programme may apply. In partner models, reliance is possible but obligations cannot be “contracted away.”
Red flags
Representations in sales decks: Promising outcomes (e.g., “better FX than your bank, always”) can be construed as advice.
Funds flows in marketing diagrams: Diagrams that imply you hold or pool client money may be inconsistent with your CAR scope.
Operational resilience: Australian regulators look closely at outsourcing, cloud, incident response, and business continuity—have artefacts ready.
New Zealand
The question: What triggers apply in a principles-based regime without a dedicated payments licence?
FSPR & AML/CFT: NZ has no general payments licence like the UK PI/EMI. Many providers register on the Financial Service Providers Register (FSPR) and are supervised for AML/CFT by DIA, FMA, or RBNZ, depending on activity. If you’re doing money or value transfer, FX, or stored value-like services, expect AML duties (programme, audit, KYC/KYB, reporting).
Bank/scheme partnerships: Card issuing and settlement typically go through NZ banks/processors with scheme oversight.
Fair dealing & representations: Even in B2B, make sure marketing doesn’t mislead about who holds client funds or guarantees outcomes.
Red flags
Offshore registrations: NZ has tightened rules to deter “flag of convenience” registrations—ensure real presence and services to NZ business customers.
Cross-border data transfers: Don’t assume NZ-to-offshore transfers are frictionless; align with privacy obligations and customer contracts.
Issues you can’t ignore
Safeguarding and flow of funds
Even when a partner “holds” customer money, you own the clarity: where funds sit at each moment; who is the legal holder; what happens on insolvency; and how customers get money back. Your contracts, reconciliations, and customer comms must match the actual flows.
KYC/KYB and beneficial ownership
B2B onboarding still requires robust KYB. Understand who is collecting documents; who screens sanctions/PEPs; whose rules apply to thresholds and verification methods; and how you handle complex structures and authorised signatories. Agree on reliance models, evidence sharing, and audit rights.
Consumer vs business distribution
Stay disciplined. Product design, terms, and marketing should clearly target business customers. Accidentally acquiring retail consumers can pull you into different regimes (e.g., DDO in AU, additional conduct in the UK, state consumer protection in the US).
Data protection and cross-border transfers
EU/UK: GDPR and UK GDPR require lawful bases, DPIAs for higher-risk processing, and approved transfer mechanisms when data leaves the EEA/UK (e.g., SCCs, UK IDTA/Addendum).
Canada: PIPEDA requires “comparable level of protection” for data processed abroad and transparent disclosures.
Australia: The Privacy Act/APPs impose accountability for overseas disclosures (you remain responsible for third-country processors).
Map data flows early: where IDs, biometrics, and transaction metadata sit; which subprocessors you use; and your breach notification triggers to clients and regulators.
Contractor model pitfalls
Contractors can help you scale onboarding and support, but regulators expect training, supervision, access controls, and QA. In some markets, contractors acting as “agents” may alter your licensing analysis; treat this as a design decision, not a staffing convenience.
Practical guidance you might need
1) Choose the right path, per product and market
A seasoned advisor will frame “embedded vs direct” as a product-by-product, market-by-market decision. The answer for payments may differ from cards, FX, wallets, or lending. Expect a crisp matrix of options, with time-to-market, control, compliance burden, and economics side-by-side.
2) Architect the legal/ops stack around the flow of funds
Regulators read your architecture. A consultant will harmonise contracts, customer disclosures, and marketing with the actual funds path and ledger entries—who holds what, when, and on what trust/e-money basis. That includes safeguarding acknowledgements, reconciliation cadence, and insolvency outcomes.
3) Pre-empt licensing and registration hurdles
US: Decide early whether to pursue MTLs or a bank-led model; align with sponsor bank risk appetites and network rules.
UK: Scope PI/EMI vs agency distribution; prepare safeguarding, wind-down, and fintech-specific financial promotions controls.
Canada: Confirm RPAA registration status and align with FINTRAC obligations if FX/remittance are in scope.
Australia: Lock the AFSL/CAR boundary and the “no-advice” playbook; confirm whether any customers could be “retail” for DDO purposes.
New Zealand: Validate FSPR registration eligibility and AML supervisor; confirm real presence and B2B-only targeting.
4) Build AML/KYC that matches each partner and regulator
A practical programme specifies: ownership thresholds, documentary vs electronic verification, sanctions cadence, monitoring rules, escalation paths, and who files reports. It also addresses evidence portability so a change of bank or processor doesn’t force complete re-collection.
5) Make data protection an enabler, not a blocker
Map personal data flows (including beneficial owners and authorised users), pick transfer mechanisms (SCCs/UK addendum), set incident response playbooks that coordinate with bank/processor timelines, and pre-clear vendor lists with partners to avoid surprises.
6) Give marketing and sales the tools to stay compliant
Provide “green words / red words” guidance for B2B campaigns—what counts as factual information vs advice (Australia), what a fair/clear/not-misleading claim looks like (UK), and what you can/can’t imply about account insurance, safeguarding, or who holds funds (US/CA/NZ too). Train teams to avoid “holding out” or implying licences they don’t have.
7) Programme governance that scales
Establish an LRC cadence: risk registers tied to product changes, board MI, testing plans for safeguarding/ops risk, incident simulations, and vendor oversight. Regulators increasingly expect evidence of control, not just policies.
8) Sequencing to hit commercial milestones
A good roadmap sequences markets and products by dependency: e.g., launch B2B payables and FX under a partner in the US first; run an RPAA readiness track in Canada; pursue UK PI authorisation in parallel if control of flows is strategically vital; leverage the CAR model in Australia to activate “no-advice” distribution while you stabilise onboarding.
9) Be intentional about local counsel
Keep a lean bench and engage local counsel surgically—licensing scoping, novel products, enforcement-sensitive issues, or regulator engagement. A fintech-focused consultant will introduce the right specialist when the matter justifies it and keep the touch light to preserve speed and budget.
Tips and traps (the short list)
Design for audits from day one. Keep clean, reproducible evidence of safeguarding reconciliations, onboarding decisions, sanctions hits, and incident post-mortems.
Write what you actually do. Contracts, customer communications, and diagrams must mirror real flows. Regulators and counterparties will spot inconsistencies.
Partition consumer from business experiences. Don’t let retail users leak into a B2B product set; enforce eligibility and verification that proves business status.
Negotiate reliance clearly. If you rely on a bank/PSP for KYC or AML, document data access, timing, and decision rights; agree on who “owns” adverse actions and notices.
Plan for partner exits. Build migration playbooks, data portability, and customer comms paths so a sponsor bank or processor change doesn’t become an outage.
Localise financial promotions. Calibrate claims about speed, cost, and savings to each market’s rules and your permissions—especially around FX and card benefits.
Test incidents together. Run joint tabletop exercises with banks/processors (security, downtime, misrouting, data breach). Practice the notification choreography required in Canada’s RPAA, UK/EMI safeguarding events, and privacy regimes.
Red flags to act on immediately
“We’ll hold funds temporarily” without a licence or proper safeguarding structure.
Sales copy implying you’re a bank/EMI/PI or that client funds are insured/safeguarded when they aren’t.
Contractors conducting KYC without formal training, QA, and direct supervision.
One-size-fits-all KYC/KYB across countries—thresholds, data, and screening rules differ.
Cross-border data transfers with no transfer mechanism or vendor assessments.
Onboarding “businesses” that are really sole traders/consumers in disguise—re-check your B2B gatekeeping.
The bottom line
Going global in B2B fintech is a product, legal, and operational design exercise (ie, it is not a form-filling exercise). The fastest paths marry a clear choice of market entry model (embedded or direct) with rigorous clarity on funds flows, permissions, AML/KYC ownership, and data movement. A fintech legal consultant accelerates this by turning regulatory abstractions into concrete architecture, contracts, and runbooks your teams can ship against—while keeping your options open as you scale.
If you’d like curated introductions to specialist local counsel in any of the markets above, that can be arranged as part of a targeted workstream when the scope warrants it.