APAC FinTechs Under The Microscope: From BNPL to VASP

The Asia–Pacific (APAC) region has been a magnet for financial technology growth over the past decade. From Buy Now Pay Later (BNPL) platforms transforming consumer purchasing habits to Virtual Asset Service Providers (VASPs) bringing cryptocurrency into the mainstream, innovation has been rapid and adoption widespread.

But as the sector has matured, so too has regulatory attention. What was once an exciting frontier of lightly-regulated innovation is now firmly under the microscope. Regulators across APAC are signalling that FinTechs, whatever their business model, are expected to apply the same anti-money laundering (AML) and counter-terrorist financing (CTF) standards as traditional financial institutions.

Why APAC FinTechs Are in the Spotlight

Several factors are driving this focus. The pace of innovation has been extraordinary: products that did not exist five years ago are now being used by millions of customers and moving billions of dollars daily. The borderless nature of digital finance compounds the risk. In seconds, a transaction that starts in one jurisdiction can pass through multiple others, each with its own regulatory approach.

Regulators have also recognised that financial crime adapts quickly to new channels. If traditional banks strengthen controls, criminals look for weaker points in the system. BNPL, digital wallets, and crypto exchanges provide opportunities to obscure the flow of funds, sometimes with minimal customer due diligence.

The Singapore Model: Licensing and Oversight

Singapore has positioned itself as a FinTech hub, but with that reputation comes regulatory responsibility. The Monetary Authority of Singapore (MAS) has progressively tightened licensing rules for VASPs, requiring them to demonstrate robust AML programmes before being allowed to operate.

The emphasis is on clear accountability. Exchanges, wallet providers, and other VASPs must meet obligations around know-your-customer (KYC), ongoing transaction monitoring, and adherence to the Financial Action Task Force’s (FATF) Travel Rule. This places them on a regulatory footing similar to that of banks, eliminating the idea that digital asset firms operate in a grey area.

Australia: The BNPL Question

Australia has been one of the most enthusiastic adopters of BNPL products, but regulators are increasingly vocal about the risks. AUSTRAC has highlighted how BNPL accounts could be exploited as layers in money laundering schemes, for instance by splitting transactions to avoid thresholds or creating multiple small accounts to mask funds movement.

The challenge is that BNPL is often marketed as a consumer-friendly, interest-free payment option. Customers expect speed and simplicity, but regulators are making it clear that these business models still need proportionate AML controls. Guidance to the sector urges BNPL firms to implement monitoring, escalation processes, and reporting mechanisms, even as the formal rules catch up.

The Challenges for Compliance Teams

For FinTech compliance teams, the challenges look different from those in traditional banking.

• High transaction volumes and low margins: Many FinTechs operate at scale but with thin profit per customer, leaving little room for expensive manual compliance processes.

• Frictionless onboarding pressures: Products are designed for rapid sign-up, often with minimal input from the customer. Balancing this against rigorous KYC obligations is a constant struggle.

• Technology stacks built for speed: Many FinTech platforms were created with agility and growth in mind, not regulatory reporting. Retrofitting compliance tools can be difficult and costly.

These challenges create a persistent tension between user experience and compliance rigour. Firms that lean too heavily towards convenience risk regulatory breaches; those that add too much friction risk losing customers.

Cross-Border Complexity in APAC

Unlike the EU, APAC does not have a single harmonised AML framework. The region is a patchwork of regulatory regimes, each with its own definitions, thresholds, and reporting obligations.

A BNPL provider operating in Singapore, Malaysia, and Australia could face three distinct AML regimes, with different interpretations of due diligence standards and reporting timelines. For VASPs, the challenge is even sharper: one country may treat digital assets as regulated financial instruments, while another may have looser oversight or none at all.

This lack of consistency is a significant burden. Firms need compliance frameworks capable of meeting the strictest applicable standards while still delivering a unified customer experience.

Regulators’ Expectations Are Shifting

One of the clearest messages emerging from APAC regulators is that novelty is no excuse. The fact that a product is new or that regulation is evolving does not absolve firms from responsibility. Instead, regulators are looking for evidence of effective control, including:

• Risk assessments tailored to the product and market, not generic templates.

• Monitoring tools that reflect the specific behaviours of BNPL customers or crypto traders.

• Escalation pathways that function even when activity is subtle, unusual, or difficult to categorise.

For regulators, importance isn’t placed on how cutting-edge the product is, but whether it can be used safely without becoming a conduit for illicit finance.

The Data Challenge

Data is at the heart of effective compliance, but for many FinTechs it is also one of the weakest points. Onboarding processes designed for speed may collect minimal information, making it harder to verify customers. Transaction records may lack standardisation, particularly when platforms scale quickly or operate across borders.

This matters because regulators are increasingly data-driven. Supervision and enforcement are often based on the quality and completeness of firms’ reporting. Poor data is not just a business inefficiency — it is a regulatory vulnerability.

Compliance as a Competitive Advantage

For firms that get compliance right, the benefits go beyond avoiding fines. Strong AML programmes can be a selling point, particularly as institutional partners — from banks to payment networks — become more cautious about who they engage with.

Trust has become a competitive advantage. A FinTech that can show its compliance systems are as innovative and scalable as its products is better placed to win partnerships, attract investors, and expand into new markets.

Enforcement Lessons from the Region

Across APAC, enforcement actions — while varying by jurisdiction — highlight common themes. Failures often involve insufficient due diligence at onboarding, weak monitoring of unusual activity, or poor escalation when red flags arise. In many cases, firms assumed their size or novelty meant they would not attract regulatory attention, only to find themselves subject to high-profile investigations.

The lesson is clear: regulators are not waiting for problems to become systemic. They are willing to act against firms that cannot demonstrate adequate control, even if those firms are small, fast-growing, or operating in emerging markets.

Looking Ahead: The Future of Regulation in APAC

The regulatory microscope on FinTechs in APAC is unlikely to soften. If anything, scrutiny will intensify as the FATF continues to push towards consistent application of its standards for virtual assets and other non-traditional financial products.

Several trends are likely:

• Greater alignment with global standards, particularly on crypto and digital payments.

• Increased expectations for governance, including board-level oversight of AML risks.

• More proactive supervision, using data analytics to identify weaknesses before they result in scandals.

• Potential for regional collaboration, as regulators explore ways to harmonise approaches across borders.

Conclusion

The FinTech boom in APAC has created extraordinary opportunities, but it has also introduced new AML risks. Regulators are making it clear that FinTechs are no longer on the periphery of financial crime prevention — they are central to it.

The firms that thrive will be those that treat compliance as part of their core architecture, not a bolt-on. By embedding AML controls into their products, strengthening governance, and preparing for closer supervision, APAC FinTechs can not only withstand regulatory scrutiny but use it as a foundation for long-term growth.