RegTech Summit Blog Recap
Synechron recently attended the RegTech Summit in London. Here are our top takeaways on key areas of focus from the attendees.
What is RegTech?
While FinTech, AI and Blockchain are major industry buzzwords, financial institutions are still defining their view of RegTech and where it fits into their business models. Many regarded RegTech as a small start-up, often set up by ex-bankers to solve a very specific problem, for a particular aspect of regulation, business or process. Some perceive their to-be risk associated with these start-ups versus more established incumbent technology firms which bring a different type of concentration/ operational risk. For those have opted to engage with RegTechs, the greatest challenge has been the effort required in moving RegTech from lab to production. Some firms incubate in their labs. Some also remove barriers to entry for prototypes. Working with firms that have more established experience running enterprise scale technology programs again can be an advantage here giving a potential preference to build custom solutions or when buying to work with Systems Integrators that are experienced with running enterprise scale projects.
Where can RegTech Innovation Occur?
In addition to having a clear approach in place for how the firm plans to engage with RegTechs, firms must also consider which regulations could benefit most from RegTech solutions. The Financial Conduct Authority (FCA) is setting an example for what types of technologies applied to what types of challenges firms might want to consist. For example, the FCA:
- Is developing a chatbot to interact with their regulated firms which include over 58,000 companies in the UK.
- planning to rewrite rulebook as machine-readable (currently 2m tall if printed, out of date, some written in the 70s)
- supporting a consortia of tech response, especially in focus areas of transaction reporting, risk, Know your Customer (KYC), and Anti-money Laundering (AML)
Clearly, one of the strongest areas for RegTech to make a positive impact is KYC, as KYC is the definite area where RegTech does bring competitive advantage for a smooth onboarding process, and automated decision-making and audit trail in an area where firms have seen heavy fines in the past.
Beyond the use cases, there was a consensus view that high-quality standardized data based on a common taxonomy is key to making RegTech solutions work, especially for initiatives to make regulation machine readable. There needs to be a clear ability to audit and explain data lineage, especially if machine learning and deep learning decision can be auditable. In addition, businesses and regulations need to evaluate policies to ensure they are keeping pace with the pace of change in technology advancement and that their organizational culture is evolving too. This might require change management, internal communications or even innovation management programs.
A final piece of advice to remember:
Consortiums, partnerships, and vendor relationships provide an opportunity for financial institutions to learn best practices, create industry standards, share utilities, and accelerate their projects.
To learn more about partnering with Synechron and our RegTech Accelerators, visit www.synechron.com/finlabs/regtech
News, tweets and good stuff.