It was a one-of-a kind event where regulation experts, software developers and financial institutions shared their knowledge, as well as their need for structures that meet compliance standards efficiently and at more competitive prices.
Increasing regulation promises to raise the cost of compliance. Financial institutions must face this challenge/obligation amid an environment with low interest rates and tight banking margins. Actual figures speak for themselves:
38% of financial services companies spend at least an entire day each week tracking and analyzing new regulations. This figure increases to 59% for systemic institutions.
One systemic institution allocated nearly €1 billion to cover the cost of tasks related to new regulatory requirements.
For example, the insurance industry allocated more than €6 billion to comply with new regulations.
The event included 25-minute “speedy” sessions with IIF member institutions and regulators from several different countries. Suade participated in this first “lab” where they presented their concepts and products and listened to the financial institutions’ and regulators’ needs.
The use of these new “RegTech” technologies has enormous potential to develop better compliance solutions, improve efficiency, profit, and lower the sector’s barriers of entry. RegTech can be used in areas such as monitoring payment transactions, the Know Your Customer (KYC) process (and their data), developing models and predictions, monitoring operations, supervising operations to ensure they comply with current regulations and even detecting the possibility of new regulations in the future.
Regulation as a Service (term coined by Suade)
Those attending the first RegTech Innovation Lab agree that this FinTech subset still faces numerous implementation barriers. There are legal restrictions on data use and new technologies, a lack of standardized information and regulation that is imposing stricter deadlines on financial institutions to implement new IT solutions. Furthermore, swifter progress is also hindered by some regulators’ methodology and outdated reporting portals, together with a regulatory agenda that has not yet been finalized. Networks that bring all the stakeholders together in the same place are also lacking.
The startup Suade says it has some of the tools needed to face these challenges. Diana Paredes, co-founder and CEO of the London-based company, explained their proposal: We put the concept of “regulation as a service” at the disposal of banks. Suade offers a platform to provide institutions regulation like a software service. “Regulations change very quickly and banks need to know that software can also adapt to these changes. This translates into greater flexibility in software architecture, and a smoother process to stay up-to-date with the new regulatory environment.”
For this entrepreneur, RegTech’s challenge is convincing financial institutions that now is the time to innovate in this area. “When you are presenting a new way of making technology, the challenge is always to find banks that are willing to innovate. It’s always hard to explain to banks why they need to adapt their technology. The world is changing and if banks don’t change, the world will change without banks,” she added. Paredes recalls that outdated systems (“spaghetti platforms”) are not a good ally for regulation while technology is appealing to regulators.