Not everything needs to be B2C. There are a ton of problems to solve for B2B - for example reconciling buy side transactions to the street. In this space though usually a bank/fund will spin off a product they developed in house but there are a few companies that have started from scratch.

Everyting in Fintech involves a mountain of paperwork and regulation. And probably a huge amount of money from the get-go.

Not true there are lots of regulatory-light fintech applications you can try like building applications on top of banking APIs. Very few people ever really use bank APIs you may find the bank will be glad to talk to you.

You likely (but not always) need a legal entity, but thats a prerequisite for setting up any business.