EU's DORA law imposes new compliance demands on Asian fintechs

On January 17, 2025, the European Union's Digital Operational Resilience Act (DORA) became fully applicable, creating a significant increase in compliance demands for financial institutions worldwide. This regulation covers over 22,000 entities, including banks, insurers, exchanges, asset managers, and ICT vendors operating within the European market. DORA shifts the perception of cyber-resilience from merely a compliance checkbox to an essential board-level key performance indicator (KPI), which businesses must adhere to in order to prevent systemic risks within the EU financial system. A McKinsey survey has highlighted the financial impact of DORA on European financial institutions, revealing that typical implementation budgets can surge from approximately €5-15 million to five to ten times that range, reflecting an anticipated tenfold increase in costs. The urgency to comply has also triggered a rise in board-room risks as leaders scramble to ensure that their organizations meet the new strict requirements. Furthermore, research indicates that seven out of ten institutions foresee elevated operational costs post-DORA implementation, and only a third feel confident in meeting the compliance deadlines. Asian fintechs, many of which are expanding into Europe, now face the challenge of reconciling compliance with the EU's updated standards, adding complexity to their operations. Singapore's digital banks and their Asian counterparts, while already regulated in their home countries, now find that DORA will impact their operations significantly if they transact with EU clients. The existing frameworks established by Asian regulators, such as Singapore's Monetary Authority of Singapore (MAS) guidelines and Hong Kong's HKMA's Operational Resilience module, lack the specific technical standards required by DORA, leaving Asian companies to create dual compliance mechanisms. As the landscape evolves, major players in the fintech sector have begun investing in technologies that enhance compliance capabilities. This includes adopting cloud-native solutions to monitor applications, providing real-time incident reporting, and maintaining comprehensive vendor-risk registers. Research indicates that integrated regulatory technology (RegTech) solutions can yield significant cost savings compared to traditional compliance tools, creating a competitive advantage for those who adapt swiftly. Consequently, firms unable to secure proper compliance measures may find themselves targets for acquisition by larger players looking to consolidate resources and expand their capabilities amidst the regulatory shift. This landscape indicates that achieving operational resilience is not just a legal necessity but pivotal for access to capital markets and maintaining competitiveness in the global arena.