Reduce Overhead With Outsourced Compliance

August 4, 2022

For many leaders in the FinTech industry, there is increased pressure to curtail spending. According to CB-Insights’ Q2 2022 Global State of Fintech Report, US fintech funding has dropped 37% compared to Q1 2022 and 43% year-over-year. M&A exits have also seen a sharp decrease of 30% compared to Q1 2022. With shrinking runways, and uncertainty on funding and/or exits; the tech industry has begun to lower costs by reducing headcount.

As of July 2022, 394 startups had laid off 56,856 employees, reflecting an over 300% increase compared to just two months prior. As the layoff wave continues to swell companies should consider non-traditional staffing models to reduce overhead costs while maintaining the coverage necessary to continue operations. 

Working with an outsourced team has proven to be a viable solution for functions like compliance and security. If you are grappling with your budget, attempting to balance cost reduction and the need to maintain a robust compliance posture; we encourage you to consider the benefits of partnering with an outsourced compliance team. 

1 — Lock in fixed rates while Compliance Salaries Continue to Rise

It’s no secret compliance talent is expensive. On average the annual salaries for compliance professionals have increased 3.4%. As of June 28, 2022, the average base salary for a US-based Chief Compliance Officer had risen to over $180,000. When building an internal team costs can quickly begin to balloon w additional expenses such as benefits packages, hardware, subscriptions/user licenses, and training, are considered. 

For many FinTechs, establishing adequate compliance resources led by a senior compliance professional is a prerequisite to partnering with Financial Infrastructure Providers like Bank Sponsors, Institutional Custodians, or On/Off Ramp solutions.   Partnering with a Compliance-as-a-Service firm can provide cost stabilization not available when staffing internally and the complete elimination of overhead costs.

Full-time outside compliance support often carries a price tag far below the yearly costs of an in-house team. The elimination of overhead costs coupled with seasoned compliance support makes hiring an outside compliance firm an attractive alternative to staffing internally.

2 — Compliance Consultancy Have Breath and Depth of Hands-on Experience

At AskDegree, we’ve seen it all with FinTechs (almost all)— from the rarest problem birthed from emerging technologies converging with traditional markets to the most commonplace issues, such as completing a due diligence exercise for an operationally critical strategic partner. 

Our collective experience is nearly impossible to find within a single Compliance Officer or Compliance Manager. Many of our partners have engaged us after months-long talent searches left them underwhelmed and still buried in compliance tasks. 

Whether fiat or crypto, lending product, demand deposit, or payment processing model we have hands-on experience that would be difficult to obtain in a single compliance resource.  Beyond product types compliance firms typically have in-depth experience with several different growth stages -- we have helped our panthers navigate pre-operational large-scale licensing initiatives, mergers & acquisitions, operating through consent orders, pre-seed to post series - b funding rounds, and even going public.                                                                                                                                                                                                                             

3 — Outsourced Compliance Consultants have Established Relationships with Key Third-Parties

Your team will stand to benefit from our collective experience, but that experience also carries another benefit — outsourced compliance resources have ongoing relationships with key third parties such as licensing authorities, regulators, and service providers - such as financial infrastructure providers, payment processors, KYC & Fraud solutions, and more.

If the thought of speaking with a regulator gives you anxiety, you are not alone, speaking with regulators can also be a frightening thought, even for seasoned CCOs and attorneys. Another advantage of working with a compliance team like AskDegree is that we speak to regulators all of the time. We have direct emails and phone numbers for many regulatory authorities and have built a rapport with these agencies. 

Our familiarity with regulators means you can put your anxiety to bed, we often communicate with regulators on behalf of our partners, so there’s no need for you to engage them directly. In instances where there is a need for you to communicate we will be on the call or will help you to draft your written response, feel confident in knowing we will guide you every step of the way. 

4 — Experienced Consultants have Muscle Memory that You can Leverage

A team that focuses on FinTech compliance often manages the same compliance processes over and over again. This repetition creates muscle memory, resulting in faster execution and avoidance of costly commonplace mistakes.  

An inexperienced compliance team could miss small errors such as APR miscalculations, disclosure misprints, or BSA program violations. Undetected systematic errors of this nature can mean large-scale problems from enforcement agencies. 

Ventures working to attract funding,  validate their business model, and build traction cannot afford to absorb penalties or reputational damage that is associated with enforcement actions or pervasive systematic errors.  

Leaning on the experience of a compliance consultancy can help an overwhelmed Compliance Leader take care of their company’s compliance needs without feeling perpetually pulled in 1000 different directions.

Time is often of the essence, and speed to resolution can be diminished if the compliance function consists of only one dedicated or semi-dedicated compliance team member. The reality is, no matter the caliber of your CCO, one person simply can’t manage all of the company’s legal and compliance risks, having an experienced team is essential to keeping pace with operational goals. 

The best compliance consultants help to augment a CCO’s abilities, allowing them to respond quickly to new requirements, maintain existing compliance controls, and lead their company successfully through rule changes.

5 — Seasoned Eyes Can Catch Mistakes You’re Failing to See

Finally, working with outside compliance firms is an opportunity to have several sets of seasoned eyes examining your operational risks. Compliance professionals with vast experience working with product development are invaluable to any start-up or seasoned team. Most systematic errors are caused simply because the right eye didn’t look over the product. 

It’s easy to develop operational blind spots. Our compliance consultants not only look for specific, recurring issues that are common amongst companies within your industry but we also look for ways to optimize workflows both within the compliance function and also in processes that bridge the compliance function with other areas of the business.

Final Thought

Venture capitalists are becoming more diligent about the projects they invest in. Financial Infrastructure firms often the gateways to expedited growth opportunities are also becoming more diligent about third-party risk management and the FinTechs they choose to partner with. Taking a proactive approach to managing compliance risk, has never been more critical.

Eliminating your compliance team to reduce cost is not an option but augmenting the way you build that team is. If you would like to discuss your compliance strategy schedule a call with us today by clicking here