Stricter regulations and cultural challenges reshape fintech-custodian relationships

VIDEO | Stricter regulations and cultural challenges are reshaping the relationship between fintechs and global custodians, according to experts at the PostTrade 360° Nordic 2024 conference. During a panel discussion on the evolving balance between cooperation and competition, industry leaders highlighted the impact of the new Digital Operational Resilience Act (DORA), the difficulties fintechs face in scaling, and the challenges of integrating fintechs into large financial institutions without losing their innovative edge. As fintechs mature, their ability to meet rigorous governance standards while maintaining agility will be crucial for long-term success.

The Digital Operational Resilience Act (DORA) is set to bring major changes to how custodians engage with fintechs. The new regulation will impose strict requirements on technology vendors, making governance and resilience top priorities. “DORA is really going to change how we work with fintechs,” said Tom Casteleyn, EMEA head of Custody at JP Morgan. “It’s not just about size—fintechs need to be resilient and capable of deep due diligence.” Many smaller fintechs may struggle to meet these heightened standards, leaving larger, more established players as the preferred partners for custodians.

Casteleyn added that DORA will push fintechs to adopt the same rigorous processes as banks. “Fintechs should start approaching their operations with the same systemic approach as custodians,” he noted.

Cultural shifts and integration

Beyond regulatory challenges, the panelists discussed the cultural differences between fintechs and traditional banks. Alan Cameron, head of Advisory FIC Client Line at BNP Paribas believes that it is a good thing when people that have worked in big banks start working in fintechs and the other way around. “It will help them understand each other, because the culture is very different when comparing fintechs with banks, as well as the objectives. Cameron also mentioned that. “Once people leave big banks for fintechs, they rarely want to go back, only when the fintech is acquired by a big bank.”

The challenge for custodians acquiring fintechs is to ensure that these companies retain their innovative edge without becoming bogged down by corporate bureaucracy. “If banks acquire fintechs and treat them like traditional departments, they risk losing the very qualities that made those fintechs successful in the first place,” warned Cameron. Adam Watson, global head Commercial Product- Custody at BNY added, “It’s about maintaining their autonomy while integrating them into the bank’s ecosystem. Without that balance, the fintech might fail post-acquisition.”

Scaling challenges for fintechs

As fintechs grow from startups to more established companies, many struggle to maintain focus and avoid taking on too much. Watson observed that fintechs often begin with a narrow, problem-focused solution but lose their way as they expand. “The fintechs that try to solve every problem end up failing,” he said. “They need to focus on commercialising what they’ve built rather than constantly expanding into new areas.”

As fintechs and custodians navigate their evolving relationships, their success will depend on balancing innovation with compliance, governance, and cultural integration. Fintechs must adapt to the strict regulatory demands of the financial industry without losing their agility, while custodians must learn how to harness fintech innovation without stifling it.

Panellists:
Alan Cameron, head of Advisory FIC Client Line, BNP Paribas
Tom Casteleyn, managing director, JP Morgan
Adam Watson, global head Commercial Product- Custody, BNY

Moderator:
Virginie O’Shea, founder and CEO, Firebrand Research

• The consolidated PostTrade 360° Nordic conference, in Stockholm on 4–5 September 2024, came to host 1,200+ delegates and featured 70 sessions.
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