<span>Regulatory Arbitrage in Cross-Border Fintech</span>: Systemic Risks, Jurisdictional Gaps, and the Imperative for Coordinated Reforms

The rapid globalisation of financial technology has produced a structural tension at the heart of digital finance: fintech firms exploit the speed, scalability, and jurisdictional ambiguity of digital infrastructure to construct regulatory arbitrage arrangements that would have been impractical under traditional banking architecture. This paper examines regulatory arbitrage in cross-border fintech — the deliberate or opportunistic exploitation of differences in licensing regimes, capital thresholds, anti-money laundering standards, and consumer protection obligations across national jurisdictions — as a systemic risk with asymmetric distributional consequences for Global South economies. Drawing on comparative case analysis across seven firms and four regulatory environments, the paper documents the arbitrage mechanisms employed by Revolut, Wise, M-Pesa, Flutterwave, Chipper Cash, LemFi, and Nigeria's domestic payment processor ecosystem — comprising Paystack, Interswitch, and related infrastructure providers. The analysis identifies four primary arbitrage typologies: licensing arbitrage, structural arbitrage, corridor arbitrage, and sandbox arbitrage. Each typology is traced through specific institutional decisions, regulatory responses, and documented consumer or systemic harms. The paper finds that regulatory arbitrage in cross-border fintech is not a peripheral compliance failure but a structural feature of how cross-border fintech firms are capitalised, designed, and scaled. Global South jurisdictions — and Nigeria in particular — bear disproportionate risk exposure from this structure, encompassing consumer protection deficits, foreign exchange instability, anti-money laundering compliance gaps, and systemic concentration risk, while simultaneously lacking the regulatory capacity and international standing to address it unilaterally. The paper evaluates the limitations of existing reform instruments — including the FATF Travel Rule, the G20 Cross-Border Payments Roadmap, the European Union's Markets in Crypto-Assets Regulation, and African regional coordination frameworks — and finds each insufficient to address the structural drivers of fintech arbitrage at scale. Recommendations are organised across three tiers: global (FSB supervisory colleges for systemically important fintechs, FATF standard revision for payment platforms, cross-border consumer redress mechanisms), regional (ECOWAS and EAC mutual recognition agreements, binding fintech provisions in the AfCFTA Digital Trade Protocol, a shared African Fintech Supervisory Hub), and national (CBN capacity investment, mandatory local licensing thresholds, NIN-linked KYC enforcement, and sandbox sunset provisions). Each recommendation is anchored to empirical evidence from the case studies and cross-referenced with existing policy precedents.