Compliance is not a choice but RegTech needs to be more convenient

RegTech needs to stop ‘letting everyone down’ and do more to make solutions convenient to the financial services industry, according to Agreement Express CEO Mike Gardner.

Increasing levels and complexities of global regulations, combined with a greater focus on data and reporting, has brought regulatory technology offerings into greater focus. The rapid developments in tech are promising to revolutionise the regulatory space, helping firms better understand and manage their risks and reduce compliance costs. However, collaboration between the industry and RegTech has yet to truly take off.

With the financial services industry seemingly reluctant to implement change, Gardner believes lack of convenience is a key factor hindering adoption. “We as a technology industry haven’t done enough to make it convenient for people, specifically in the financial services market, to turn to technology to automate their regulatory woes. The regulatory landscape is complex and too often RegTech vendors deliver complex solutions that require heavy lifting and significant customization. The key to adoption is delivering the simplicity and convenience to manage the risks in an efficient manner,” he said.

“For financial services organisations, compliance is not a choice. It is a necessity. Until regulatory technology is convenient for its intended users, institutions will continue to leverage manual, human-driven tactics to ensure they remain compliant. Non-compliance risks and fallout are too costly and can have severe consequences, so they need to ensure they are covering all the bases. It comes down to what as an industry we are failing to do to make it convenient.”

In the current global RegTech environment, the majority of solutions take a long time to configure and require a lot of capital to set up. Once implemented, there is no guarantee the solution will work in the way it was intended. “That’s not convenient. As RegTech innovators, we have to bring solutions to the market which are simple to implement and integrate with other systems. We need to commit to delivering convenience on day one, rather than solutions that need to be customized and re-engineered to work with the rest of the tech stack.”

According to Gardner, that’s what differentiates Agreement Express, an onboarding automation platform for financial services. On the product side, the RegTech aims to ‘bring high utility on day one’, not in a matter of months.

“Unfortunately, a lot of technology companies in the RegTech space that were bootstrapping on the way up unintentionally took a detour along the way, becoming software-enabled services companies instead of software companies. As a result, it takes a lot of work to put their solutions in place. That’s not the clients’ fault. It’s a systemic issue within the RegTech industry.”

Agreement Express’ timeline to implement its onboarding solution is a fraction of the time it takes its competitors, and this continues to be a key priority, according to Gardner. The company is a firm believer in technology being agile and keeping pace with the rapidly changing needs of the market, giving organisations the flexibility required to remain competitive while responding quickly to regulatory fluctuations.

“Our goal is that a bank should be able to change its core systems in a day,” Gardner added. “While this is great for the bank, it is technically bad for the technology companies as it creates a vulnerability. A lot of companies aim to be hard to rip out and replace, ensuring clients have to stay with them because it would be too painful and resource-intensive to implement another solution. We see this repeatedly – organisations keeping technologies even though a solution may no longer be the best for its intended purpose, or a newer, better product may have come to market.” Gardner would prefer to be ‘vulnerable’ as this results in companies delivering on merit and holding their vendors accountable for continuous innovation to solve for the rapidly morphing regulatory landscape. The ability for technology users to switch products has always led to an improvement in offerings.

“We would rather have the onus on us to make sure we are always providing the best technology and service.” Gardner added.

Onboarding and workflow automation

Founded in 2001, and headquartered in Vancouver, Agreement Express allows financial services companies to deliver a consistent client onboarding experience across their product offerings and channels, while providing deep analytics that enable proactive and personalized client advice. Its platform facilitates a client-centric focus at each stage of the lifecycle.

“This isn’t a new marketplace. But it’s a marketplace which has been without a unified technology solution almost since the beginning,” according to Gardner.

Even in this digital era, some of the largest players in the financial services industry are still receiving their onboarding documentation, which is heavily regulated, in some form of paper.

“That is crazy to me. It has been like that, not because there is a fear of technology, but rather because there hasn’t been a solution that allows them to facilitate automation and compliance across their networks or distributors and clients. Our job is to solve that.”

Currently, the onboarding process can take days or even months. “There are huge costs associated with that, even at 24 hours the time to revenue is outrageous.”

Agreement Express’ first aim is to take that time down, with 85 percent of accounts that run through its system managing that process in less than 1 hour. “We do that without sacrificing the integrity of the process or the transaction,” according to Gardner. The second big problem is ‘not in good order’, for example, missing information, mismatch of data, lack of documentation, etc. On average, 30 percent of all applications in the financial services market are ‘not in good order’.

Agreement Express has already reduced the rate down to about 3 percent. “We could get it down to zero, but to make it perfect in today’s regulatory environment, we would compromise the experience for the end customer and that is a delicate balance we are mindful of.”

Organisations using the company’s onboarding platform can benefit from huge savings by reducing time to revenue and increasing the in good order rate to upwards of 97 percent. By automating onboarding, risk and suitability assessment, compliance and risk decisions, and providing business intelligence throughout, financial services organisations can shift their man power to more important tasks. “If you don’t have to physically check every application manually, then those people that were doing that work can be put on to more higher value jobs, as opposed to checking one piece of information matches another. You are essentially taking away the administrative, low-level activities which are part of their jobs, creating better customer experiences while also delivering higher job satisfaction and increased onboarding speed in the process.”

Copyright © 2018 RegTech Analyst

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