Over seventy-three percent of fintech startups fail within their first three years due to preventable regulatory compliance issues, according to a new report.
The study, conducted by Los Angeles-based consulting firm Hare Strategy Group, examined five years of data from over 400 fintech ventures and identified early-stage regulatory navigation as the most decisive factor in determining whether a startup succeeds or fails in the competitive fintech landscape.
Jeremy Hare, principal researcher and founder of the firm, emphasised the implications of the findings. “What’s striking about the data is how technical excellence alone doesn’t guarantee market success,” Hare said. “The findings clearly show that early regulatory planning is as critical as product development.”
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The report, titled ‘Bridging the Compliance Gap: Critical Strategies for Fintech Success in 2025,’ highlights several data-driven insights aimed at founders, investors, and ecosystem stakeholders.
Among the key findings: fintech startups that incorporated regulatory preparation in their pre-seed stage improved their survival rate by 64 percent.
Furthermore, integration issues with banking partners accounted for 42 percent of failures among startups that were otherwise technically sound. Cross-border compliance emerged as the most frequent failure point for 58 percent of international expansion efforts.
The data also revealed a strong correlation between regulatory expertise on founding teams and fundraising success. Startups with such expertise secured venture capital 2.8 times faster than those lacking it, suggesting that investors increasingly value proactive compliance capabilities as much as innovation and scalability.
As global fintech investment reached $53 billion in 2024, the study noted that the industry is grappling with evolving oversight and fragmented international rules.
However, in Africa, fintechs solidified their attractiveness to investors in 2024, attracting over $1 billion in funding, according to Africa: The Big Deal.
The data insight firm that tracks funding of $100,000 and above noted that the sector’s share of total start-up funding increased to 47 percent from 42 percent in 2023, marking its highest proportion since 2021. African startups raised $2.2 billion across all sectors in 2024.
It noted that four fintech companies — Moniepoint, Tyme, MNT-Halan, and M-Kopa — featured among the year’s top ten fundraisers, signifying the sector’s robust growth.
The firm highlighted that while fintech’s ascent was not guaranteed at the start of the year, it recovered well in the second half, with deals such as Tyme, which became a unicorn, pushing to the forefront.
