Navigating Regulatory Shifts in Financial Inclusion: Long-Term Risks and Opportunities for Fintechs and Regional Banks

The financial inclusion landscape in 2025 is being reshaped by a dynamic interplay of regulatory shifts, technological innovation, and evolving market dynamics. For fintechs and regional banks, these changes present both opportunities and risks that demand careful navigation. As the Federal Deposit Insurance Corporation (FDIC), Consumer Financial Protection Bureau (CFPB), and state regulators recalibrate their approaches, the long-term implications for financial inclusion-and the institutions driving it-will hinge on adaptability, compliance, and strategic foresight.

Opportunities in a Shifting Regulatory Environment

The FDIC's recent withdrawal of its proposed brokered deposit rule in March 2025, according to a Goodwin report, has injected clarity into the Banking-as-a-Service (BaaS) ecosystem. By halting a rule that would have redefined "deposit broker" and eliminated key exceptions, the FDIC has preserved the flexibility that underpins fintech-bank partnerships. Acting Chairman Travis Hill's emphasis on innovation-friendly policies further signals a potential easing of barriers for fintechs seeking FDIC-insured charters, provided they demonstrate robust anti-money laundering (AML) and compliance frameworks, as noted in a PwC analysis. This could catalyze a new wave of BaaS collaborations, enabling fintechs to expand their reach into underserved markets while regional banks leverage their technological agility to diversify revenue streams, the Goodwin report suggests.

Simultaneously, the anticipated shift toward deregulation under a potential Trump administration offers additional tailwinds. As outlined in a Skadden analysis, the rollback of Biden-era policies-including Basel III revisions and a more permissive stance on digital assets-could create a more favorable environment for fintechs and regional banks alike. Streamlined approval processes for fintech bank charters and reduced capital requirements may lower entry barriers, fostering competition and innovation in financial inclusion.

Risks in a Fragmented Regulatory Landscape

However, these opportunities are tempered by significant risks. The CFPB's aggressive expansion into the payments sector-exemplified by its May 2025 final rule defining "larger participants" of digital consumer payment applications-has introduced new compliance burdens, as described in the Goodwin report. By subjecting Big Tech firms and fintechs to its oversight, the CFPB has heightened regulatory scrutiny, a dynamic the Goodwin piece also highlights with reference to Google's lawsuit challenging its designation. The agency's future direction remains uncertain, with a potential Trump-appointed director likely to reassess or even rescind these rules. Such volatility creates operational and strategic challenges for firms reliant on stable regulatory frameworks.

Compounding this, the rise of state-level regulatory activity-particularly in jurisdictions like New York-has fragmented the compliance landscape, according to the PwC update. As federal agencies like the CFPB scale back enforcement in certain areas, states are stepping in to fill the void, leading to a patchwork of requirements that increase costs and complexity for fintechs and regional banks. This trend underscores the need for institutions to adopt a dual focus on federal and state compliance, a costly but necessary adaptation.

The Dual Challenge of Innovation and Risk Management

Beyond regulatory shifts, broader risks loom large. Cybersecurity threats, economic uncertainty, and the rapid adoption of artificial intelligence (AI) are reshaping the risk profile of financial institutions. A WTW report ranks regulatory shifts as one of the top five risks for financial institutions, noting that deregulation could spur innovation but also exacerbate financial crime and erode consumer trust. For example, the reversal of the Federal Reserve's Regulation II debit interchange fee cap has left fintechs scrambling to adjust business models built around predictable fee structures, an outcome explored in a Forbes analysis. Similarly, delays in implementing the CFPB's open banking rule under Section 1033 of the Dodd-Frank Act have created operational uncertainty, as detailed in an ABA article.

Strategic Implications for Investors

For investors, the key lies in balancing exposure to high-growth fintechs with the resilience of regional banks. Fintechs that prioritize compliance infrastructure and AI-driven risk management-such as those leveraging machine learning for AML monitoring-may outperform peers in a deregulated environment, the WTW report argues. Conversely, regional banks that forge strategic BaaS partnerships while maintaining strong capital buffers could capitalize on the FDIC's innovation-friendly stance, the PwC update suggests. However, investors must remain wary of overexposure to firms operating in highly fragmented regulatory markets, where compliance costs could erode margins, as the PwC analysis warns.

Conclusion

The 2025 regulatory landscape for financial inclusion is a double-edged sword. While deregulation and innovation-friendly policies open new avenues for growth, they also amplify risks related to compliance, cybersecurity, and consumer trust. Fintechs and regional banks that succeed will be those that treat regulatory shifts not as obstacles but as opportunities to refine their strategies, invest in robust compliance frameworks, and harness technology to drive inclusive growth. For investors, the path forward requires a nuanced understanding of these dynamics-and a willingness to adapt as the regulatory terrain continues to evolve.