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RegTech

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12/07/2018by Matt Elton

“RegTech is trust, as a service”: the outcome of this week’s RegTech for London event in Canary Wharf

As everyone in the industry will tell you, RegTech is styled to be ‘the next big thing’, ‘bigger than FinTech’, ‘more profitable than bitcoin’. Numerous events take place week on week, repeating the same story. At the same time, the financial industry has suffered serious reputational damage through the 2008 crisis and other scandals, including mis-selling and misconduct, facilitating money laundering and terrorist financing.

This week was the first in a series of events being held in London – The RegTech For London series. The event was attended by leaders from the financial services industry, consultants, as well as by a number of RegTech firms and the wider technology sector.

The title of this first session was “Do you really know and understand your customer?” taking the subject of AML and KYC, increasingly seen as a compliance burdens, and exploring how to regain the confidence of the market and to ultimately profit from KYC.

It has been made evident that RegTech will play a hugely important role in the defining of the future of the Financial Services Industry, in London, throughout Europe, and globally. For those who are not aware, RegTech is the application of technology to solve challenges relating to regulation, compliance and supervision. Regulatory Technology is the application of technology to facilitate regulation compliancy. It has become evident that the future of the industry depends upon the industry’s ability to redefine themselves by reapplying RegTech to the ever-fluctuating market. As regulation becomes more complex, it becomes harder to manage costs. RegTech allows the companies to shift their focus to true products and services instead of spending millions on compliance alone.

Advertised as “a completely different kind of RegTech event”, the event did not disappoint; “the program was outstanding!” said Digital Trust’s Bharat Pathiavadi.  The series of events is the brainchild of RegTech visionary, Matt Elton who added “we have brought speakers from around the world, to London, the home of RegTech, bringing speakers London hasn’t seen before, with a message the industry hasn’t heard before. We brought a line-up of speakers from around the world who came from as far away as Silicon Valley, Toronto, and Singapore as well as throughout Europe”.

One of the speakers, Laurent Marochini, Head of Innovation & Quality at Société Générale described the session as a “great discussion around a challenging topic, that need to be transformed into an opportunity”, he concluded that “RegTech is trust, as a service”.

The series is organised by FinnoLux; an international firm focussed on enabling organisations to thrive in a digital world through delivering Expertise, Technology Solutions and Projects. A key part of the firm’s activities is in working with firms to develop and deliver holistic RegTech strategies.  FinnoLux CEO, Matt Elton believes that “the future of the industry depends on us looking at regulatory compliance through another lens – it is not just about cost and burden, regulation provides opportunities for business growth, technology is the key to unlocking these opportunities.

The next session in the series will tackle another complex and controversial topic – “Brexit and regulatory divergence” and will be held in September.  For more information please see https://regtech.events/london.

The event featured a number of influential RegTech leaders:

Matt Elton, CEO at FinnoLux
Donna Bales, Co-Chair of RegTech RoundTable Foundation from Toronto, Canada
Rosalie Koerts, Senior Sales Manager at Keesing Technologies from Netherlands
Sam Gibbins, MD/Lead Facilitator at Complilearn Pte Ltd from Singapore
Kunal Patel, Senior Business Leader, Product/Strategy from UK (previously in India and Singapore)
Laxmi Ramanath, CEO at La Meer Inc from Silicon Valley, California
Sian Lewin, Client Delivery Director at RegTech Associates from London
Laurent Marochini, Head of Innovation and Quality at Société Générale from Luxembourg
Rhys Collins, Director of Business Development at Total Systems plc from London
Adam Richards, Operations Director at Albany Group from London

 


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31/01/2018by Matt Elton

Author: Leen Cuypers

When thinking about using technology in HR, addressing compliance issues might not be the first thing that pops up in your mind? While many people link technology to the cost-saving aspect of automating labour-intensive, highly manual processes, there’s a lot to say about the less-explored use of technology to facilitate HR compliancy. It is in fact the point where the highly matured HR Tech meets RegTech.

The HR Contradiction

My experience in HR companies and the intensive collaboration with HR professional across big and smaller organisations have given me the insight there’s generally speaking two kinds of people in HR: the ones that are detailed, administrative workers and the ones that are the people-centric, less analytical but highly soft skilled people. Human Resources does combine two of the most contradictory functions: the administrative management of everything involving employment on one side of the spectrum and the people-focused, enabling employees to grow in their roles, supporting the management in building an attractive workplace, able to bring in the high potentials they’re aiming at. In some companies, the different roles are clearly separated but in many organisations, they are not, resulting in the HR department not being the most popular within the organisation.

RegTech as HR enabler

RegTech is a wonderful enabler for HR professionals to focus on their core tasks and be the people centric department they should be. When looking into more detail at the multitude of EU and national regulations all companies, and therefore every HR department, should comply with, there’s a multiple page checklist, dealing with topics like working conditions, redundancy, training, equal opportunity treatment of job candidates and employees, pensions, social security, taxation. For HR managers to ensure their people are working within the limits the law prescribes, the use of technology could be a useful means. Imagine, a state-of-the-art certified technology, able to check your current policies against the newest regulations in place, wouldn’t that be a time- and cost-saver, leaving no doubt about the topics on which you do and don’t comply. Audits would become a ‘one-click’ operation instead of the stress they are causing now.

Conclusion

We firmly believe the time has come to add the compliancy piece to the HR Tech puzzle and enhance HR’s ability to fulfil their people-centric roles. Will 2018 be the year in which HR Tech (automation) solutions add a RegTech layer assuring the company to have a real-time view on the compliancy status and as a result protect the firm as well as its employees?

About the Author

Leen Cuypers: Leen’s ability to see creative solutions, coupled with her analytical skills and drive to get things done, helps her investigate, define, and solve business challenges for the 21st century. Focussed on RegTech for emerging economies she delivers credibility and trust.


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26/01/2018by Matt Elton

Authors: Leen Cuypers & Matt Elton

Two recent conversations we had about the success factors of RegTech, both from very different angles (one in advising an investor, the second one an interview on the RegTech boom) got us thinking deeper about the topic of what to look for when considering RegTech investment and prompted us to share our thoughts in this blogpost.

In times where new regulations and the threat of fines for non-compliance seem to be coming from everywhere, the potential for RegTech is real, and it is likely it will become much bigger than FinTech. At the same time, the space has become so crowded, one can speak about a RegTech minefield, where it’s hard to distinguish the high potential start-ups from the less interesting ones.  At the start of the RegTech investment boom 12 months ago, a lot of funding was focussed towards reporting solutions. The space has heated up with an increasing variety of solutions out there, and many solutions branding themselves as “RegTech” to take advantage of the boom, thereby clouding a clear view on the real opportunities. As one of the investors in our network described it, “investing (in early stage startups) is like throwing darts at a dartboard”. To help you as an investor at better pointing your dart to the RegTech dartboard, here’s some observations from our side on the factors for RegTech success. These are especially applicable to start-ups, less so to scale-ups who have, hopefully, already proven the value the provide and the interest they have generated.

Show something different

As RegTech has become a buzzword, a lot of Tech companies are focussing on the low-hanging fruits. They understand some of the challenges of the industry, and dedicate their focus on the less complex ones. Currently, we see a huge number of companies working on solutions for identity verification, AML/KYC, automated onboarding, of primarily individual customers. Without renouncing the technical quality of these solutions, a profound analysis is needed to understand what differentiates one solution from the others on the market and what are the chances for this one to be successful and leave the others behind. The majority of these solutions focus on identifying individuals, whilst the industry knows the real headaches come from the identification of beneficial owners behind corporate structures, like, for example institutional investors. Our recent meeting with a solution provider especially targeting the identification of beneficial owners across multiple jurisdictions, shows there are entrepreneurs who are able to step away from the big crowds’ focus and are able to understand the real challenges of the industry.

Understand the value chain

This brings us seamlessly to the second point: understand the value chain, and the challenges beyond the obvious. Get to know those challenges that have absolute priority, where companies are willing to dedicate time, effort and money on – after all, as financial institutions face many challenges, of which some or more pressing than others.

During a recent conversation with a Compliance Officer of a large international institution, he described the situation they find themselves in – in fact, they now have so many point solutions in place, each dedicated to one piece of regulation or regulatory requirement, that what they are looking for now are ways to reduce this huge number of point solutions, lacking overview or structure, into “one, or maybe two solutions”. There is a clear need, therefore, for holistic solutions, which provide more challenges in developing them, but focusing on the true needs of the industry. Those start-ups which committed time and effort to conduct a profound market research in order to understand the value chain are able to address the problem and not the symptom; increasing the chances for success greatly.

RegTech 2.0

RegTech 1.0 has made place for RegTech 2.0, where Tech entrepreneurs are looking for ways to strengthen the industry beyond the simple automation of regulatory processes. The financial industry has suffered serious reputational damage through the 2008 crisis and other scandals, all based on the misconduct of some individuals within the industry. Developing a technical solution to protect the firm and at the same time strengthen the wider industry, might be one of the golden eggs investors are looking for. RegTech’s value proposition of strengthening instead of disrupting, enables the technology focused on regulation, compliance and supervision to transform the way in which traditional industries like the financial one, function and enable the existing companies to remain relevant. Those start-ups understanding the bigger picture and using this proposition to the fullest are likely to be very successful.

Conclusion

The RegTech space is moving so rapidly that, like the FinTech boom before it, it is becoming more and more important to look at the real long-term value that solutions provide to the market – we are not only talking about understanding customer needs, but a process that goes much deeper. Unquestionably there are no shortages of imaginative ideas or initiatives, but are they targeted at releasing value? To determine the real value of a solution requires a deep understanding of the value chain and the inner workings of the business.

About the Authors

Leen Cuypers: Leen’s ability to see creative solutions, coupled with her analytical skills and drive to get things done, helps her investigate, define, and solve business challenges for the 21st century. Focussed on RegTech for emerging economies she delivers credibility and trust.

Matt Elton: Matt is one of the world’s leading RegTech strategists. Working with governments, regulators, and industry, he shapes the future. Matt has delivered real results for financial services organisations, and the public sector, throughout Europe, and in Canada.

 


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04/07/2017by Matt Elton0

Author: Leen Cuypers

Wednesday, June 28, FinnoLux hosted an event focussed on ‘RegTech Solutions for the Fund Industry’ a collaboration with Enterprise Ireland, and the International RegTech Association.
The purpose of the event was to the opportunity RegTech brings to the fund industry. As ‘digital enablers’, at FinnoLux work, on a daily basis, with clients in the financial sector, defining with them their digital strategy, executing the delivery roadmap, to enable them to take full advantage of the opportunities available.

We believe the use of technology, especially RegTech, has an exceptionally positive impact on the organisation and the industry, when those technologies are applied which strengthen instead the business. When a digital strategy is developed and executed in line with the overall business strategy. For those who are not aware, RegTech is the application of technology to solve challenges relating to regulation, compliance and supervision. RegTech, has however, a value beyond the area of compliance. This is driven by the value proposition of RegTech itself which is not one of disruption but is one of strengthening.

One of the key take-away messages from the event is that RegTech will play an important role in the defining of the future of the Fund Industry in Luxembourg.

It became evident that the future of the industry depends upon the industry’s ability to redefine themselves by applying RegTech. Regulatory Technology is the application of technology to facilitate compliancy with regulations. While one of the values what RegTech brings is to simplify and improve compliance, the wider benefit is far larger and acts as a stimulus to bring automation to the processes.

RegTech’s Value Proposition

In our daily interactions with the Fund sector and more generally with the financial industry, we understand that the ever-increasing regulatory burden and complexity, make it harder to manage costs and human errors are more likely to occur. Margins are under pressure due to competition from new market entrants, especially those in Asia. RegTech allows the companies to avoid spending millions on compliance projects and instead to shift their focus to products and services which can truly differentiate them. By introducing RegTech, companies free-up time and resources to enhance regulation and compliance while strengthening the industry and protecting customers.

By freeing up both people and money, the companies can focus on developing the financial industry of the future. The annual spend of firms in the financial sector on regulatory compliance ranges between 10% and 15% of their annual revenues, with much of the work performed manually. Imagine if a large portion of this could be spend on the business itself.

A second main take away from the event, is that RegTech opens the door to collaboration, as we all know ‘being compliant’ isn’t regarded as a differentiator. We focused specifically on Luxembourg and Ireland as the two main Fund Centres in Europe. It was recognised there is an opportunity to collaborate and to present a strong European front. The openness and willingness from the industry – the Fund industry, as well as the RegTech companies – to work together across borders was shown during a round table discussion. Laurent Marochini, Chair of the ALFI working group on Blockchain and Cryptocurrencies mentioned: ‘Luxembourg and Ireland are competing for the end customer but are not in competition in terms of technology or compliancy. We should find ways or niches to work together. We don’t have the knowledge everywhere, we cannot be the best everywhere. We can exchange with the key people in Ireland. We speak the same language, we are used to speak English and the language of the client. We need to find out how we can progress together.’  From the RegTech companies’ perspective, CEO of Luxembourg-based governance.io Bert Boerman added ‘we are already collaborating across borders as our different solutions are in many cases very complementary and together deliver real solutions to the customer’s many challenges’.

This openness is a major step forward in building a strong European Industry. The different Fund Centres can compete for their end customers, whilst simultaneously building a strong framework in which they can thrive. If we would succeed in doing so, we wouldn’t have to look to the United States to see what they are doing and how they are doing it – regardless the cultural and regulatory differences – but we would be able to build on and tap into the European capabilities, talent and rich innovation history.

Luxembourg’s opportunity

Dr. Subas Roy, global chair of International RegTech Association (IRTA), former Global RegTech Lead at Ernst & Young and reputed as being one of the ‘famous five of RegTech’, while presenting in Luxembourg this week, explained the RegTech industry is rapidly growing, with an estimated size of $20bn by 2020. ‘That is a huge opportunity, at a global scale, for Luxembourg too, to be the leading pioneer of RegTech in the Assets Management and Fund sector, to help create a global centre of excellence, an innovation zone that can help further foster its current 4% economic growth for the years to come!’

One of the International RegTech Association’s core missions is to work with the financial industry, including the Funds sector, to bring the solutions they need. Take for example the six RegTech companies who presented their solutions during the event in Luxembourg this week – these solve real problems that the people in the room actually experience every day. IRTA is furthermore dedicated to build Centres of Excellence on a global scale, where prestigious academics, the industry, regulators and all other stakeholders meet and work together to find solutions that will strengthen the industry.

Matt Elton, CEO of Luxembourg-based FinnoLux, and Vice-chair and co-founder of the IRTA, has, as a true visionary understood RegTech’s powerful value proposition for the Luxembourgish and global Financial Industry. He acknowledges the tremendous opportunity Luxembourg has in strengthening and shaping the very industry in which it is the most successful, by leading the way in the field of RegTech. Matt elaborates, ‘The groundwork which has been laid by Luxembourg’s leading academic institutions and, in particular, SnT’s cutting-edge research in machine learning, artificial intelligence, machine readable regulation, … reinforces Luxembourg’s position, as these technologies are directly applicable to RegTech. It is by the highly collaborative model between academia and the private sector that gives Luxembourg this wonderful opportunity to remain in the lead. Moreover, it is worth stating that the Luxembourg Institute for Science and technology have for several years been developing a capability in RegTech itself. This positions Luxembourg as the ideal place, not only to develop RegTech capabilities but also to apply them to one of our strongest industries. By using the talent and capability which we have and applying it to our industry, we can enable Luxembourg to remain a leading financial centre whilst at the same time becoming one of the world’s leading RegTech hubs’.

FinnoLux is focussed on the creation and execution of digital strategy in the financial sector, of which automation of mid- and back-office are key parts. As a digital enabler, we make digital ‘happen’ for our customers, assisting them in reinvigorating their business and enabling them to reduce costs and inefficiencies and instead focussing on the true differentiators. Our deep understanding of the industry value-chain as well as our true business experience puts us in the perfect position to align your digital strategy with your future perspectives.


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06/03/2017by Matt Elton0

RegTech is the automation and delivery of regulatory obligations in compliance and monitoring tools for the finance, wealth, insurance, telecommunication space. A RegTech Canada innovation centre is the location and facility that will create and support labs, training programs and help bring in early stage Canadian talents in order to create services and product solutions which will help meet the requirements of businesses and regulators. In addition, it will be the bridge that develops confidence and closer communal relation with the Canadian digital consumers. As the Canadian digital customers become more tech-savy with their transactional activities they look for our industry sectors to protect their data and against fraud. By having updated automated tools and solutions that follow the regulatory requirements Canadians can start to feel at ease and invest more in these financial, insurance and wealth sectors that provide service.

The Canadian banking environment have developed a global reputation of having stable and secured banks that avoided a major meltdown from the 2008 financial crisis like other countries such as the US and the EU experienced.  Canada stringent and strict banking laws have proven that our quality of protecting our banking from getting involved with systemic risks shows why we rank high in stability as we follow the rule of law and we respect it.

Along with government involvement and regulatory cooperation illustrates one of the key components that is inherent in Canadian culture and therefore developing a Canadian RegTech ecosystem could push Canada on becoming a leader in its own right..  Coupled with having innovative location, government funding, talent, strict and secure financial institutions, access, and technology according to Matt Elton, RegTech Canada can be successful initiative to help boost the Canadian economy. The RegTech Innovation centres in Toronto and Vancouver brings in pools of talents and entrepreneurs that are creating solutions and students are already innovating, researching and being educated from the cutting edge, second to none, innovative academia and universities on AI and Cybersecurity technology that could be a niche market in RegTech that Canada can lead. They have started to make headways in AI and Cybersecurity and there is no other location that can carry out this initiative to the extent that a RegTech Canada can. A recent report on Cybersecurity from Deloitte further highlights this.

The current market for Cybersecurity products is estimated at $106 billion. At the same time, the average Canadian data breach costs over $6 million, and analysts project the aggregate global costs of Cybercrime at $2 trillion, with dramatic growth rates. With high enterprise risk but no single company leading the market for enterprise solutions, it’s an attractive sector for a new entrant. Deloitte’s report argues that Canada, and Ontario in particular, should play a leadership role in the global development of this vertical (Lexology).

Entitled “Harnessing the Cybersecurity Opportunity for Growth”, the report was produced by Deloitte LLP (Deloitte), well known for its expertise in this space.  It concludes that there are significant benefits for Ontario if the province were to strengthen its cybersecurity innovation ecosystem, with a focus on the financial services industry.

In the World Economic Forum’s Global Risk 2016 report, cybersecurity risk was recognized as one of the top commercial risks along with geopolitics, the environment, and the economy. The Deloitte report makes it clear that although Ontario is well positioned, there are still areas that need to be improved if the province is to establish a leadership position in a globally competitive environment. www.oce-ontario.org/Cybersecurity-Report

For Canada, it will boost the Canadian economy with technology on a global stage. At the same time RegTech Canada will deliver and automate real life industry problems in monitoring and complying with regulatory obligations. In turn, Canada can set the stage to promote these finished products not only within Canada, but globally. Canada is ripe for a change from being known for only natural resources to leader in regulatory technology.


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03/03/2017by Matt Elton0

There are many articles defining and dealing with “RegTech” framework and methodology. It is considered the latest tech that will disrupt the financial service industry. On the other hand, it will be the innovation tech that can really provide solutions to financial organizations that deal with risk. As for the digital customers/end users, it will be a system that works to protect us with our financial transactions.

So what does Regtech mean and why should we place any importance on this digital transformation?

Well first, you would need to identify yourself as a digital customer/end user. Second, you would need to know what RegTech is. And thirdly, you would need to know if the RegTech solutions and tools provide you with security for your everyday financial activities and transactions.

Are you a digital customer/user?

Any type of transactions that require you to transfer money, pay a bill, do trades, borrow and lend online or via mobile would qualify you as a digital customer/end user.

What is “RegTech”?

It is the process and system of regulating and keeping the financial industries in compliance through technological tools and solutions.

How does RegTech fit into your life?

After the effects of the 2008 financial crisis, RegTech is becoming the surety that digital customers are looking to in order to building confidence in the financial industries that deal with their money.

What are the components and why should we care?

There are several factors that point out the importance of having RegTech for digital customers and end users.

  1. Data protection
  2. Keeping up-to-date with technology (speed)
  3. Protection from misconduct externally and internally
  4. Providing easier ways of access and doing transactions without losing our privacy.

Every year, new regulations for financial institutions are imposed which are very costly and have lengthy processes. Coupled with digital transformations coming into the fold, these institutions still struggle to deal with the main problems of our digital users of today (i.e. data protection, hacking, and money laundering).

What RegTech does is allows businesses to innovate and create digital tools and solutions to automate, monitor and compel financial organizations to be in compliance with regulatory directives for the protection of our data.

Recently in the news, headlines over data breaches and hacking at financial institutions and firms have been the focus on making sure there are stricter and tighter rules in order to prevent identity theft and money laundering activities. In the EU and the US, payments, trading, and money transferring are expected to held to highest standards of compliance; meaning daily and live monitoring and reporting of activities are imposed on these financial organizations.

Currently there are major players that have innovated platforms to make it easier to digitally monitor and report these activities to the appropriate authorities. The Financial Conduct Authority (FCA) and Consumer Protection Acts include guidelines and rules dealing with the operations and health of the financial institutions. Such guidelines include the Basel Accords, the EU Solvency Directive, MiFids and Emir and the Dodd–Frank Act (US).

As well, under the PSD2 regulations in the EU, strong identity authentication is a requirement for for financial organizations that deal with digital customers/end users in payment and remittance services. There is new and upcoming identity management software that can identify and authenticate you as the real user in order to help minimize the risk of ID fraud and misconduct.

In addition, through advanced biometric authentication, you will no longer need a password to identify who you are as your mobile will identify the “live” you. For the EU, it provides a safer alternative as opposed to depending on passwords. Because of RegTech initiatives and solutions, transactions can be done faster and you will be better protected and far more secured.

Another example of why RegTech is important for digital customers is that it facilities transactions that can be far reaching, rapid, and inclusive for global digital communities. Whether you are business person, fund or asset manager that handles a lot of clients’ data and funds, you expect to trust that the organizations you are transferring money to are in compliance, are fast, and up to date with the latest technology that can make your transactions run smoothly, no matter which country you are in. You would like to ensure that your data can be saved in a “safe” such as the “blockchain” in order to protect your private information and keep from the risk of hackers.

Digital devices are becoming the norm for digital consumers and with Regtech solutions and tools, they can help solve the issues of risks that could affect us as end users.

In conclusion, RegTech tools and solutions play a vital role in helping financial organizations monitor and report their activities. It can also provide us with tools that help identify who we are and safeguard our data. As well, it can help make our transactions quicker while not compromising our privacy. As a digital user, it is important for me to trust the financial organization that I give my money to and that they are following the rules to protect and ensure my data privacy. RegTech is the ecosystem that is able to solve financial organization risk problems in this world of digital transformation; a solution that we can all agree is greatly needed.