To make it in a crowded market, fintechs must differentiate themselves with regulatory prowess and data at the forefront of their strategy. 

AI providers that prioritize compliance over inventiveness when building their platforms have an inherent advantage, Emmett Shipman, fintech strategy and growth senior manager at Wolf & Co., which provides consulting services to fintechs and financial institutions, told FinAi News.  

“On a scale of one to 10, 10 being the most valuable, risk and compliance falls at a 12.”

— Emmett Shipman, fintech strategy and growth senior manager, Wolf & Co.

“There’s such a regulatory burden for banks and I think fintechs that understand that are going to have a competitive advantage,” he said.

For example, Fifth Third Bank often narrows its list of potential fintech partners by looking at those that take regulation “very seriously,” Jay Budzik, senior vice president and director of AI at the $294 million bank, told FinAi News. 

“A lot of [fintechs] have a belief and a thesis of what’s going to matter in the market and then that kind of falls apart when you hit the reality of what it means to do business with a bank,” he said.  

“There’s all the due diligence that we have to do on the AI model and the outcomes, all the demonstrations that we have to do for the regulators.” 

Wolf & Co.’s Shipman said he’s seen several deals blow up because a fintech lacked proper AI governance, data security or another metric that could lead to KYC or anti-money laundering violations.  

“Fintechs are from Mars and banks are from Venus,” he said. “How can we help them speak the same language?” 

Data accessibility  

With compliance at the top of the list, fintechs must consider data accessibility and cost. 

Data accessibility can differentiate fintechs from the herd, Sarah Biller, co-founder of Fintech Sandbox, a nonprofit that gives startups free access to financial data, told FinAi News. Biller is also a board member at Nashville-based Thread Bank.  

“For one, the cost [of data] is extraordinary for a founder,” Biller said.  

This is an especially large hurdle for AI providers that have a market-ready product but still lack bank partners or overall funding, she said.  

Fintech Sandbox’s data sets, which include transactional, behavioral, pricing and stock market data, have a combined value of roughly $600,000 when used over six months, Biller said. 

Last year, JPMorgan began charging fintechs to access its data, with costs ranging from 60% to more than 100% of users’ annual revenue, according to data and advisory firm GIS.  

Data quality and accessibility are becoming increasingly important as agentic AI solutions emerge, Biller said.  

“Those capabilities at their core are only as good as the data that’s gone into them,” she said. Without investing in data access, it will be difficult for fintechs to come out on top.  

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