Building trust in regulated markets

Trust is sometimes spoken about as though it were a branding exercise.

In financial services, it is much more fundamental.

Banks, insurers, investment firms and payment businesses operate in markets where customers are handing over money, information or responsibility for important financial decisions.

A failure can therefore have consequences far beyond an unhappy customer.

The same principle increasingly applies to the technology companies that support those institutions.

A fintech business may not hold a customer's money directly, but if its technology performs an important function within a bank, its failure could still interrupt services, compromise information or create regulatory problems.

That is why trust has commercial value.

For an early-stage business, establishing it can be challenging.

A young company does not have twenty years of audited accounts or a long list of institutional references. The founder is therefore asking a customer to make a decision with relatively little history available.

The solution is not to pretend that history exists.

It is to compensate for its absence with transparency, evidence and good judgement.

Trust begins with doing what you say you will do.

If a pilot is due on Tuesday, deliver it on Tuesday.

If there is a problem, explain it before the customer discovers it.

If the technology cannot perform a particular function, say so.

These things sound basic. They are also surprisingly powerful.

The next layer is operational.

Regulated financial institutions increasingly need to understand the companies on which their services depend. FCA rules emphasise operational resilience and the management of third-party dependencies, while new reporting requirements for material third-party relationships are due to take effect in March 2027.

This changes the standard that technology companies need to meet.

Cyber security cannot simply sit with the most technical person in the business.

Business continuity cannot consist of everyone having the founder's mobile number.

Data management cannot be explained by saying everything is "in the cloud".

A credible fintech needs to know its own dependencies.

Where is data stored? Which providers are critical? What happens if a provider goes offline? How quickly can service be restored? Who tells customers if something goes wrong?

The interesting thing is that answering these questions often improves the company itself.

Good governance is sometimes portrayed as the price entrepreneurs must pay to work with institutions.

I see it differently.

Understanding risk makes a business stronger.

Knowing where your intellectual property sits is useful regardless of whether a bank asks.

Having accurate financial information is useful regardless of whether an investor requests it.

Testing disaster recovery is useful even if a procurement questionnaire never arrives.

There is also a cultural element to trust.

Financial services contains experienced people who have seen promising businesses succeed and fail.

They are usually less interested in a founder's ability to present a perfect story than in how that founder responds when the story is imperfect.

Can management acknowledge a mistake?

Will they take advice?

Do they recognise the limits of their own experience?

Will they spend money fixing an important control even when it does not immediately increase revenue?

These can be more revealing indicators than a pitch presentation.

Investors should look for the same qualities.

At Rosary Capital, we want to back ambitious founders. Ambition is essential.

But confidence and judgement are different things.

The founders most capable of building trusted businesses tend to understand that distinction.

They can be extremely confident about the problem they are solving while remaining willing to change their approach when the evidence tells them to.

That intellectual flexibility becomes particularly important in regulated markets.

The FCA's innovation programmes themselves reflect this balance. The Regulatory Sandbox supports genuine innovation, but applicants are still expected to demonstrate consumer benefit, readiness and a genuine need for regulatory support. Innovation is not treated as an exemption from responsibility.

That principle applies more broadly.

The best fintech businesses do not succeed despite regulation, governance and institutional scrutiny.

They learn how to innovate within that environment.

Over time, that becomes part of their competitive advantage.

Technology changes quickly. Financial institutions change more slowly, partly because they carry responsibilities that start-ups do not.

The companies capable of bridging those two worlds will be the ones that endure.

And the bridge between them is trust.