RegTech Intelligence

Five questions to the community on the RegTech take off

Fresh off the press from the FCA is a call for input on “Supporting the development and adoption of RegTech”. We would be inclined to see this as a ringing endorsement of our website, but it seems the FCA are thinking more about the bigger picture.

The FCA are seeking broader views on how to facilitate the advance of technology-assisted regulatory management in the best possible fashion, stemming from a handful of emerging themes that authorities have been picking up on.

It is not a spur of the moment idea – support for RegTech found its way into the treasury’s budget for 2015 in March as well, and this year’s Fintech take off (see here for a predictive slice of things to come) has only compounded the matter and compelled the FCA to take this further. Now the whole bundle of Fintech and RegTech goes under the umbrella of Project Innovate, an initiative to foster and not stifle innovation through regulation, leading to the proposal for a regulatory sandbox so those of us in the FinTech community can get experimenting under privileged conditions.

So what are the themes that the FCA have been noticing? Of course, number one has to be that special word, collaboration – of which there have been a number of ‘acceleratory initiatives’ (as the FCA call them) between FinTech and financial services firms that have encouraged, fostered and funded the use of technology in regulatory compliance and reporting. A perfect example of this would be the Banking Technology awards a couple of weeks ago, which praised numerous collaborative initiatives in FinTech. One of these was the project between MarkLogic, Smartlogic, GFT, AWS, JWG and RBS, all of whom played their respective roles in harnessing JWG’s RegDelta platform to help create a number of Business Requirements Documents (BRDs) for simplifying industry compliance.

As for the other emerging themes, the FCA have noted the use of big data, visualisation tools, and cloud technologies for their cost and operational efficiency and ability to provide guidance and insight into the on-the-surface complexity of financial regulations.

Additionally, the FCA have provided a number of suggestions as to their own contribution to the FinTech-RegTech advance. These forms of support, such as the provision of regulatory expertise, legal standards on the use of RegTech for FIs, and the removal of barriers to innovation, cannot be provided effectively without help from the industry in pointing out where the problems and the opportunities are located.

The UK is now the fastest growing region in the world for Fintech investment. But, is there a place in there for RegTech, the slightly-less-attractive-sounding cousin? RegTech, has, in fact, managed to move up and up with a similar level of acceleration to the cutting edge P2P platforms and virtual currencies. The reason for this is the exciting blend of finance and information technology is shared by the movement, whereas digital solutions simplify and make things transparent, traceable and dynamic.

If anything there is even more of a need for RegTech in today’s atmosphere of excessive regulation. Siphoned off departments of firms can hardly keep up with all the new paperwork, and compliance has become a game in itself. The UK asset management industry is reported to be spending £2 billion a year to meet EU regulation. Is there any way of cutting down the price, simplifying the operations, and reducing the exposure to operational risk and non-compliance? Yes. And it’s RegTech.

JWG’s RegTech blogsite has fast become a platform for dialogue, a standard-bearer for how market participants can come together and comment upon, discuss and share solutions to upcoming regulation. The conversation is culminated even further in our CDMG and MIG groups, praised for doing the seemingly simple, but – before – unthinkable idea of bringing stakeholders round the table to proactively plan together.

Perhaps one of the most exciting aspects of recent technological advances of the last few decades has been the momentum. This isn’t slowing down. Even RegDelta is in a state of continual evolution, with new automated tagging features, the ability to map specific regulation to a specific firm’s requirements without even the need for human intervention, and the rule interpretation module which traces specific paragraphs in bulky regulations to particular rules drawn up by a firm. While RegDelta is unique in the services it provides, the real possibilities of FinTech and RegTech are endless. The FCA’s newfound support for the finance-IT revolution is a clear acknowledgement of its potential.

So we leave you, the reader, with five questions to think about regarding how we shape the inevitable infiltration of RegTech and FinTech into the global financial sector. These are the questions the FCA has asked in their call for input … with no particular time limit on the responses (in an attempt to encourage as much support and feedback as possible). However, initial workshops to discuss key priority areas have already been planned for Q1 2016 and the FCA mention that, if you want to have your say on how these are run, you should send in your feedback sooner, rather than later.

Given the indefinite prominence of FinTech and RegTech in our financial future, I’m pretty keen on getting stuck in on this one.

1. What Regtech could be introduced in order to make it easier for firms to interact with regulators, at a lower cost and administrative burden?

2. What role would it be most useful for the FCA to play in order foster development and adoption of RegTech in financial services, and what method would best suit this engagement?

3. Are there any specific regulatory rules or policies that cause barriers to innovation or adoption of RegTech for financial services (products or processes)? Please provide examples of when these rules or policies have stifled development/adoption and describe the impact (e.g., delay, abandonment of project, economic impact). We are also interested in hearing about regulatory rules or policies that may extend beyond the UK regulatory jurisdiction including, for example, European or international policies and agreements.

4. Are there any regulatory rules or policies that should be introduced to facilitate innovation and adoption in RegTech for financial services (products or processes)? Please provide examples of when the absence of these rules or policies has stifled development/adoption and describe the impact (e.g., delay, abandonment of project, economic impact).

5. Which existing regulatory compliance or regulatory reporting requirements do you feel would most benefit from RegTech?

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