Payment processing innovation, fraud detection algorithms, regulatory compliance technology, and security features qualify for substantial R&D tax credits. Average fintech savings: $200K-$600K annually.
Fintech is one of the most R&D-intensive industries. Between payment processing innovation, fraud detection algorithms, regulatory compliance requirements, and security challenges, fintech companies face constant technical uncertainty.
Every aspect of fintech development involves solving novel problems: How do we process payments in under 100ms? How do we detect sophisticated fraud patterns? How do we comply with evolving regulations across 50 states? These are textbook examples of qualifying R&D.
Unlike other industries where R&D might be 20-30% of development work, fintech companies often see 70-85% of engineering time qualifying because nearly everything involves technical innovation and compliance challenges.
Payment Processing Innovation
ACH, card networks, instant payments, crypto integration
Fraud Detection & Prevention
Machine learning models, pattern recognition, risk scoring
Regulatory Compliance Technology
KYC/AML, money transmission licenses, BSA reporting
Security & Encryption
PCI DSS compliance, tokenization, end-to-end encryption
Fintech development almost always involves technical uncertainty due to security requirements, regulatory complexity, and performance demands. Here's what typically qualifies:
Payment processing involves significant technical uncertainty around performance, reliability, and integration complexity. Solutions aren't available off-the-shelf.
Typical Credit Value:
2-3 engineers working on payment infrastructure for a year = $80K-$120K in credits
Fraud detection is inherently experimental - you're constantly testing new algorithms, features, and models to stay ahead of evolving fraud tactics. High technical uncertainty.
Typical Credit Value:
1-2 data scientists + 2-3 engineers = $100K-$180K in credits
Building technology to automate complex, evolving regulatory requirements involves significant R&D. You're solving problems that don't have clear technical solutions.
Typical Credit Value:
2-4 engineers on compliance tech = $70K-$140K in credits
Financial data security requirements are among the most stringent. Implementing cryptographic systems and security controls at scale involves significant R&D.
Typical Credit Value:
1-2 security engineers full-time = $50K-$100K in credits
Federal Credits:
State Credits (NY example):
Total Annual R&D Tax Benefit:
Federal + State credits combined
$816,350
Enough to hire 4+ engineers
Fintech companies often leave money on the table due to these common mistakes:
Many fintech companies use Stripe, Plaid, or other APIs and think they don't qualify. But if you're building custom logic on top (fraud detection, custom flows, optimization), that qualifies.
Reality Check:
The API is just infrastructure. Your custom payment logic, reconciliation, error handling, and optimization work on top of those APIs is qualifying R&D.
Building technology to automate KYC, AML, and other compliance requirements is highly qualifying R&D work, but many companies don't track it separately from "operations."
Solution:
Tag compliance technology projects separately in your system. Automation of regulatory requirements almost always qualifies due to technical complexity.
Fraud detection and risk modeling is pure R&D - constant experimentation with algorithms, features, and models. Yet many companies don't allocate enough credit to this work.
Solution:
Document model iterations, features tested, and performance improvements. All data science work on fraud/risk qualifies at close to 100% of time.
PCI DSS compliance, encryption implementation, and security hardening involve significant R&D but are often categorized as "compliance" or "infrastructure" and missed.
Solution:
Security engineering work implementing encryption, tokenization, and PCI controls qualifies. Document the technical challenges and experimentation involved.
A Series A payment processing platform for marketplaces and platforms. $8M ARR, 15 engineers, processing $500M+ in annual payment volume. Core product: white-label payment infrastructure with embedded banking features.
Company had never claimed R&D credits. Their previous accountant said they were "just integrating existing payment APIs" and didn't qualify. They were burning $180K/month and needed to extend runway before Series B.
Result: 83% of engineering time qualified for R&D credits - far higher than the company expected.
Federal Credit:
$372,000
California State:
$115,000
Elected payroll tax credit for immediate cash benefit. Set up quarterly tracking system for ongoing annual claims.
— CEO & Founder
Get a free assessment to see how much your fintech development qualifies for. Most companies claim $200K-$600K annually.
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