Financial technology companies (fintechs) continue to reshape global financial services, leveraging technological innovation to deliver greater financial inclusion, convenience and efficiency. Yet, as the industry continues to scale in reach and complexity, these firms encounter significant challenges. At Baker Tilly, we understand these challenges and have the knowledge and experience to help you conquer them. Whether you're just starting or looking to scale, our tailored services are designed to meet your specific needs and help you achieve sustainable growth.
Pitfall: One of the most significant issues fintech entities face in 2025 is navigating fragmented and rapidly evolving regulatory environments. Jurisdictions are responding differently to innovation. Fintechs must manage compliance across numerous regimes— anti-money laundering (AML), know your customer (KYC), data privacy and new artificial intelligence (AI) governance laws. Depending on your geographic footprint, AML regulations will differ from country to country - it is critical to establish a global AML program with policies and procedures that ensure compliance with requirements for the jurisdictions you are in as well as heightened risks of interacting with customers on a global scale. Too often, firms underestimate the complexity of multi-jurisdictional compliance, resulting in regulatory breaches, fines, product rollbacks or even forced market exits. Further, many fintechs use banking-as-a-service (BaaS) providers to offer financial products without banking licenses. However, regulators have intensified scrutiny of these models due to risk concerns. Overreliance on loosely governed BaaS partners can result in indirect regulatory liabilities, as seen in the collapse of several U.S.-based BaaS partnerships in late 2024.
Solution: An early integration of legal and/or regulatory knowledge and robust due diligence on BaaS reviewers, including instituting clear contractual compliance provisions that align with regulators’ expectations.
Pitfall: Fintech platforms are prime targets for cybercriminals due to the sensitive financial and identity data they hold. In 2025, AI-enhanced cyberattacks—such as deepfake social engineering, synthetic identity fraud and autonomous malware—pose existential threats. Firms often lack adequate cybersecurity budgets or expertise, prioritizing growth over security, which creates vulnerabilities, particularly in third-party integrations and application programming interfaces (API) infrastructures. Privacy expectations are rising as consumers become more aware of digital surveillance and data monetization practices. In parallel, stricter data laws are being enforced globally. Non-transparent data collection and sharing practices damage customer trust and expose firms to legal risk.
Solution: Implement privacy-by-design principles and give users granular control over which data to share and what can be done with that data once shared.
Pitfall: AI and machine learning underpin many fintech services, from credit scoring to fraud detection. However, biased algorithms, a lack of explainability and ethical lapses are surfacing as central concerns. Fintechs deploying opaque AI systems face criticism for discrimination (e.g., in lending) or denial of services without recourse. This erodes brand credibility and may violate emerging AI accountability laws.
Solution: Ensuring that explainable AI is implemented, engaging in regular bias audits and establishing the use of human-in-the-loop systems are all best practices that will become regulatory expectations in 2025.
Pitfall: Customer service automation, particularly via chatbots, has generated user frustration and regulatory complaints. In financial services, errors in automated decision-making can cause significant harm. This overautomation undermines user experience and can create operational rigidity.
Solution: Firm automation models need to be hybrid, blending automation with human support, proving to be more sustainable. Fintechs that employ design thinking, continuous customer feedback loops and behavioral data analysis to refine product offerings often succeed.
Pitfall: Less mature entities often chase vanity metrics, (e.g., app downloads, active users, etc.) at the expense of profitability and retention. This misalignment has led to a wave of fintech shutdowns in the post-2022 venture capital contraction. In the end, unsustainable growth undermines long-term viability and investor confidence.
Solution: Focus must shift toward sustainable metrics—customer lifetime value, lifetime value (LTV) to the customer acquisition cost (CAC) ratios and real usage patterns.
Pitfall: As fintechs scale, their infrastructure often lags due to the reliance on legacy systems, weak DevOps practices and patchwork cloud integrations – all of which create operational fragility. During rapid user acquisition phases, downtime, transaction failures and data inconsistencies become more frequent. Adding to the complexity is the war for fintech talent, especially in areas like data science, compliance and cybersecurity. High attrition, remote workforce challenges and the inability to attract and retain specialized talent limit innovation capacity and risk management.
Solution: Investing in scalable cloud-native architectures and observability tools is crucial to ensure infrastructure supports growth, not hamper it. To attract and retain talent, successful firms are offering equity, remote work flexibility and accelerated / differentiated career growth pathways. Compliance talent is increasingly challenging to find and requires specialized knowledge meaning outsourcing to a third party can be an attractive option.
Pitfall: In 2025 tech giants continue to expand into payments, credit and insurance, leveraging massive ecosystems and data advantages. Fintechs find it difficult to compete on scale, user trust and infrastructure.
Solution: Successful fintechs employ niche specialization, community-based finance differentiation and superior user experiences (UX).
Pitfall: M&A transactions, driven by economic pressures, scalability and the consolidation of market saturation, may erode agility and culture as integration failures are common. Often, M&A distractions derail innovation and alienate core users.
Solution: Clear integration road maps, cultural alignment assessments and stakeholder communication strategies are key.
Pitfall: Increased public scrutiny and tighter regulation make fintechs more vulnerable to lawsuits, especially regarding data breaches, discrimination and mis-selling. In 2024, we saw an increase of legal battles for fintechs, which drain financial and reputational capital, often sparked by unvetted product rollouts. Poor incident responses worsen crises, as seen in several fintechs’ delayed responses to outages or fraud in 2024.
Solution: Strong internal controls, recurring legal reviews and early red teaming of products are gaining traction amongst the industry to mitigate these risks.
Pitfall: Asset tokenization—representing real-world assets (RWAs) like real estate or equities as digital tokens—has seen widespread experimentation in 2024 and early 2025. However, many projects fail to offer real liquidity or legal enforceability. Firms launch tokenized products without clear ownership structures, regulatory compliance or market demand, resulting in stalled platforms or investor losses. While decentralized finance (DeFi) and blockchain have potential, integrating them into traditional financial systems remains complex due to scalability, interoperability and user interface issues.
Solution: Firms must prioritize legal clarity, custodianship mechanisms and integration with regulated exchanges to ensure utility and trust.
