Preparing your Fintech startup for stringent FCA authorisation

December 12th, 2022

Fintech startups face many hurdles when establishing themselves, and the Financial Conduct Authority (FCA) is one of – if not the – largest. The FCA is the financial regulatory body in the UK, which means it doesn't take applications lightly.

One of the key mentors for our Fintech Foundation incubator, ComplyFirst, empowers startups and SMEs to streamline and automate regulatory reporting, which means it has a great deal of experience with the FCA.

We spoke to Fiona Jelly, Founder and CEO at ComplyFirst about how Fintech startups can prepare for successful FCA authorisation.

Here are Fiona’s top five tips for successfully navigating the FCA’s complex authorisation process.

1. Be ready and organised

The first step is to understand your organisation and business plan inside and out. This seems like an obvious statement, but far too many companies don't take it to heart.

"With a good regulatory business plan in place, you can demonstrate to the FCA that you’re ready, willing, and organised to deal with anything that life throws at you and your business," says Jelly.

You will also need to focus on exactly what your product is, who your customers are, and why you will be relevant in the modern financial world.

“Be laser-like in researching your target market and document your rationale as to why your proposed business will be successful.

To start learning your own business, focus on these five key areas:

Capitalisation – how much money does your startup need to satisfy the FCA's capital resource requirements?
Governance – do your key individuals have the right mix of experience and expertise to oversee a regulated business?
Business model – which regulated and non-regulated activities are offered to customers?
Customers – what processes will be needed to ensure that customers are at the heart of the business model?
Compliance – how do we put the right compliance structure in place?

2. Setting up funding

The next step is funding. According to Jelly, all your startup's funding, budget, and financial projects need to be iron-clad and withstand scrutiny.

"Forget back-of-the-napkin calculations, you'll need to prepare detailed financial projections for (at least) the first 12 months."

It's not enough to just have the full amount sitting in your business account, all of the details and numbers must be perfect.

"You’ll need to ensure that your funding is sufficient to cover your initial set-up costs, salary costs and FCA application costs, whilst still being able to demonstrate capital adequacy at the time of your authorisation and on an ongoing basis."

3. Your staff are crucial

Filling critical positions in your organisation is key to the success of your FCA authorisation.

This means that the CEO, CFO, Head of Compliance, and the MLRO will need to be filled, or appointments made at the time of application for the FCA.

If you are struggling to fill those positions, it's worth looking at your network and groups, building relationships with recruitment agencies, and reaching out to potential candidates beforehand.

"Building out a stellar management team and having these hires in place before you apply for your authorisation could cost you dearly. Don’t forget to factor this into your fintech’s funding requirements."

4. Build your tech before you apply

Unfortunately, the FCA does not approve any applications with the intent to build. You'll need to either build your systems now or purchase them from a third party.

"You’ll need to consider what technology you need to process transactions, how you’ll onboard customers including what KYC tools you need, and how you’ll set up the correct infrastructure to ensure you submit regulatory reports to the FCA in an accurate and timely manner."

Of course, building out your tech stack can be a difficult undertaking, which is why we offer APIs for on-demand core banking services and a marketplace of pre-built integrations.

5. Try to understand how the FCA operates

The final piece of advice is to try to put yourself in FCA's position. Ask yourself if you meet all of the threshold conditions for authorisation and if you can evidence it.

If you're completely sure that all of your documentation, personnel, and numbers are perfect, hit the submit button.

Need help with your fintech’s FCA regulatory reporting?

Fiona Jelly, one of our Fintech Foundation mentors is a former compliance director with 10 years of proven success in financial services. She’s secured multiple FCA authorisations and has had plenty of regulatory engagements over the years. She knows the pitfalls and can share her insights so you can avoid them and keep the FCA happy.

Need one-to-one support from on subjects crucial to successful FCA authorisation? Get in touch with our team and they'll be happy to assist you.