Nasir Zubairi, CEO of the LHoFT
RegTech is a bit like the “helmet a skier wears when racing down a black run” – it cost effectively protects financial institutions while they move forward at speed. And speed is of the essence in today’s fast evolving world of financial services. Regulatory related technologies ensure firms are safe and compliant while they innovate to keep up with changing customer behaviors and needs, while also helping to eradicate increasingly penalising overheads.
RegTech solutions reduce the complexity and capacity-demanding qualities of compliance while constantly and quickly adapting to new changes in regulations. With RegTech, companies are able to put capital to better use, reduce risks within the system, and improve supervision via enhanced insights.
It is common for the cost of compliance to be confused with the need to renew infrastructure, but a strong business case for RegTech adoption can be made by representing it as a cyclical opportunity to drive tech renewal.
Institutions should use the regulatory and technology drivers of change to reassess how their IT teams work: rather than taking on large projects that take five to ten years to complete, continuous delivery would deliver value from day one – implementing IT systems and infrastructure in the frame of knowing they will change again rather than implementing systems with the false belief they will last ten years. As with other new technologies, firms should look to RegTech in bridging the gap between IT and business functions, with tech enabling better performance.
While getting excited at the potential of RegTech, Institutions must be weary of creating the legacy system of tomorrow. Regtech sets out to tackle some of the biggest issues affecting financial institutions. The high costs caught up in maintaining complex systems and the management of stranded data is crippling competitiveness and profitability. An open architecture approach will be central to addressing these issues effectively and creating value. The agility of the best RegTech solutions must drive a move away from complete integration with legacy infrastructure, to piecemeal replacement of services in new environments. As such, RegTech firms would benefit from remembering that might be easier to win desktop space than server space.
As a great number of RegTech propositions are single point solutions, the sector as a whole may consider the benefits of collaboration. There is a clear need for a RegTech offering that aggregates issues and provides a range of services. RegTech firms could find value in coming together to explore how they might complement each other and drive the sector’s growth for mutual benefit and deliver holistic solutions to financial institutions.
Heads of compliance and regulatory reporting have a great role to play in the exciting developments to come. They perhaps should reassess their own role, complementing the core responsibilities related to “safeguards and control” with “business enabler and business development” in their job description. A paradigm shift is occurring and compliance officers must look at how they should adapt to new models of work to ensure they remain ahead of the curve and take their institutions in the right direction. If you continue to do what you always did, you will always get what you always got – a new lens is needed.