Building in Regulated Markets: Lessons from Sila’s Navigation of Financial Services

Building in Regulated Markets: Lessons from Sila’s Navigation of Financial Services

Building a fintech company is like constructing a skyscraper while the building codes are being rewritten. In a recent episode of Category Visionaries, Sila co-founder Shamir Karkal shared insights on managing compliance in the rapidly evolving financial services landscape.

The Early Compliance Lessons

The journey began with Simple in 2009, where naming conventions themselves posed regulatory challenges. “We initially just called it bank Simple, quickly realized that there’s kind of regulatory issues with that and switched to just calling it simple,” Shamir recalls. This early lesson highlighted how regulation shapes every aspect of fintech innovation.

Understanding the Regulatory Landscape

The scale of regulated financial systems is massive. “The card networks move about $9 trillion a year in the US. The ACH system moves about $73 trillion a year. And then Fedwire moves about three to $4 trillion a day,” Shamir explains. Operating within these systems requires deep understanding of their regulatory frameworks.

Building Compliant Infrastructure

Sila’s approach to compliance is embedded in their product design. Their platform provides “tools like KYC and KYB APIs, digital wallets, virtual bank accounts, ACH payments, and buyer and card payment suit,” Shamir notes. This infrastructure helps customers navigate regulatory requirements while building their applications.

The Edge Case Challenge

In regulated markets, edge cases become critical. “Everything about payments, especially, it’s not about the 99 or 99.9% of payments that work fine. It’s all about that .1% that have a problem,” Shamir emphasizes. These edge cases often have regulatory implications that must be carefully managed.

Scaling with Compliance

The growth numbers show how Sila has managed to scale while maintaining compliance. “We’ve seen like about five X growth in total transactions this year… and we do anywhere from ten to 25% transaction growth month on month right now,” Shamir shares. They now serve “close to 100 customers in total, more than 50 of whom are live.”

The Future of Regulated Innovation

Looking ahead, Sila sees opportunity in new payment systems like Fed Now, while recognizing the persistence of existing regulated infrastructure. “Every payment system that ever achieved broad adoption across multiple geographies in human history is still with us today,” Shamir notes, highlighting the importance of building for long-term regulatory compatibility.

Lessons for Founders

For founders building in regulated markets, Sila’s experience offers valuable insights. Success requires both technical innovation and regulatory expertise. As Shamir puts it, “Startups are not like an overnight success. It takes years, sometimes decades of building before you do become that overnight success and everybody hears of you. So it is 99% perseverance.”

Building in regulated markets demands more than just following rules – it requires understanding how to make regulation a competitive advantage. By embedding compliance into their infrastructure, Sila helps other innovators navigate regulatory complexity while maintaining their focus on building unique solutions.