Regulation gets blamed for slowing growth. At Relace, we think the opposite is closer to the truth. Firms that build regulation into how they design products launch with fewer surprises, raise money with more confidence and earn customer trust sooner. Firms that treat it as a cost to minimise pay for it later in rework, delays and lost trust.
Regulation protects consumers, and protected consumers trust new products enough to try them. That is what high-trust economies run on, and those economies tend to be the ones that innovate. Lighter rules do not produce more innovation: where trust is low, adoption is slow.
We have seen what happens when compliance becomes infrastructure. Identity verification is the clearest case: once fintechs could hand off KYC to a specialist provider, they stopped fighting it and got on with growing. Most other regulatory work has not had that moment yet. Closing that gap is why we are building Relace.
Name the real problem
“Regulate less” is a lazy answer. When a team says regulation is holding it back, the useful question is which of three problems it actually has:
- A rule prohibits the activity or product. That is a policy question and the conversation belongs with the regulator.
- The team does not know what is expected of them. That is a knowledge and interpretation problem.
- Compliance costs so much that the business stops being viable. That is a cost and tooling problem.
Each one needs a different fix. Lumping them together as “too much regulation” means none of them gets solved.
Map your perimeter before you need to
A compliance checklist matters less than rigour. The most common failure we see is regulation treated as an afterthought, and this quietly weakens the business plan.
We regularly meet pre-Series A startups, some already serving customers, that have never mapped their regulatory perimeter. A frequent blind spot is the line between information, advice and execution. A team believes it only provides information, while its screens say “this portfolio suits you” next to an expected return. That is not neutral information.
The fix is to shift left. Walk through the product flow and its communications screen by screen, and ask how the business as a whole will be classified. It is far cheaper to find a perimeter question in a design review than in a regulator’s letter.
Lean in and show your thinking
Firms take one of two approaches. Some lean in and use regulation to build a stronger business. Others do the minimum and treat it as a box to tick. The firms in the first group engage their regulator early rather than waiting to be told. Relace is part of the FCA’s Supercharged Sandbox, and more of the firms we meet there are choosing to lean in.
The reason is that regulatory questions are product questions. Who is the target market? What does the customer actually gain? Is the infrastructure built in-house or through partners? A founder who can answer those well has a better investor conversation as well as a better regulatory one. For a company with a new business model, it is one of the few risks it can actually control.
Regulators are not looking for perfection. They want to see the reasoning. Show your process, keep the evidence and be open about the trade-offs you made. None of that is anti-innovation or anti-growth.
Compliance is getting cheaper, non-compliance is not
Every founder makes trade-offs and compliance has to compete with marketing and hiring for resources. Some of that cost will never go away. Regulation is a structural fact for roughly a third of the global economy, not only for financial services.
What is changing is the price. Compliance used to mean slow and expensive advice that captured an interpretation at a single point in time. Technology now provides compliance as infrastructure, so costs and timelines are falling. Our advice to early teams is to prove the product’s value first and then build the compliance infrastructure as traction appears.
The cost of getting it wrong is larger than the fine. Reputational damage often costs more, and for firms in several markets it compounds as the rules diverge. Large banks keep whole teams on horizon scanning, watching for regulatory change and translating it across the business. Smaller firms rarely can. The tooling for this is now in its second generation which brings continuous monitoring within reach of far more organisations.
Where to start
For a startup new to all of this, the first steps are small:
- Write down what you are building, who it serves and how. Answer from a growth angle and a regulatory angle at once.
- Record the answers. Evidence of your reasoning is worth having long before anyone asks for it.
- Map the perimeter of each activity. Use the tools now available to test different paths quickly and cheaply, and compare what each one costs and returns.
- Make monitoring a habit. AI rules are changing across every major market, and disclosure expectations are rising, including which third-party and AI components your product relies on. Building this into everyday work is far easier than retrofitting it.
Regulation is not going away, and it should not. Treated as part of the product, it gives a business clearer decisions, stronger investor conversations and customers who trust it. That is a growth lever.
That is what we are building Relace for: compliance that runs inside the product, so regulation works for growth rather than against it.