How can RegTechs ease the adoption by financial institutions?

RegTechs should focus on going for smaller branches and countries to prove their technology works, which in turn will make it easier to scale up, according to a panel at the Global RegTech Summit 2018.

Getting new technology and solutions adopted by financial institutions can be a tough task. The panel at the RegTech Summit which included, senior staff from Aquibix, Electronic IDentification, Jumio, InfoCert and Bureau Van Dijk, discussed ways to be adopted by financial institutions, and benefits from onboarding the solutions. One of the issues talked about by the group was the lack of clarity on who was the right person to speak with when communicating with these organisations.

Carmine Auletta chief innovation officer at InfoCert said, “That is the problem (finding the right person), because for the kind of service we sell, it requires multiple skills. You need to know about compliance, technology, regulations, and business, and that makes it so challenging. In my experience, the process becomes much easier and faster for much smaller players and banks, because everything is kept closer.”

Regardless of the size of the institution, it is important for the companies to have a clear proof-of-concept (PoC). When engaging with potential clients it is not always a buyer the discussions will be held with, and it is imperative the company is able explain the concept across the various teams they speak with. Ted Datta, director at Bureau Van Dijk, stated that having a project manager on the client or prospect side is the easiest way to ensure this. If there is not one, then hiring one is essential, as it is key for both sides to make the most of the engagements.

The PoC is an integral part of entire sales operation and Simon Winchester global partnerships & head of financial services EMEA Jumio stated that they are crucial to pushing through processes as quickly as possible. He added, “You can be a startup or a well-established company with a great brand and great referencing, which helps, but ultimately the proof is in the pudding. You need to see the solution holds up to what the sales teams or to what the businesses is claiming is possible.”

However, it’s not entirely down to this aspect alone, as a well-structured process on both the RegTech’s and financial institution’s side matters. Winchester explained how if a RegTech doesn’t conduct talks and strengthen relationships with the right teams and instead is handed around from department to department, then adoption will likely fall-through. Likewise, on the institution’s side if there is no stake holder engagement or an owner of the project, things will dry up.

Eastern Europe a place for quicker adoption?

Trying to establish a company in the market can be hard, and legacy solutions can slowdown the onboarding of new RegTech solutions. To this extent, InfoCert’s Carmine Auletta believes that scaling up has been easier in Eastern European companies, compared to in the west. This comes down to a number of factors, from regulators being more engaging with new technology, to the market currently being more dynamic.

He added, “It (adoption) has been very fast in Eastern Europe because of the size, because of their hungry for innovation much more than western counterparts. We have talked to western country financial institutions and it took us 18 months to get to the POC level – on the other side, in six months we were live.”

However, this idea was not supported entirely by the whole panel, with Jumio’s Simon Winchester only half agreeing. He stated that while there has been a big wave of innovation and fast paced movement in the region, it is something he has noticed globally. It’s not clear what region is the fastest for adopting solutions, but there are niche markets where its slow for things to be completed because regulators aren’t as quick and not as eager for digital transformation.

He added, “Operating with businesses at a different scale has a huge effect. If you’re working with one of the biggest banks in the world, then naturally there’s going to be multiple touch points and many different approvals and polices that you’d have to adhere to and get things delivered. A new digital bank coming out of Poland, might be a lot easier because it’s arguably more forward thinking, has less red tape and capable of making decisions quicker.”

Bureau Van Dijk’s Ted Datta also partially agreed to the idea, but said that a lot of it is down to the size of institutions. “You do have this concept in the industry of leapfrogging, where certain less regulated or more developing countries, can borrow technology that wasn’t available 25 years ago that all the banks used and have created legacy systems on.  So yes, perhaps in Eastern Europe where you’ve got emerging institutions that are more ready to adopt technology out of the box that large institutions can’t.”

How can the regulator fit into this?                                                                                                                        

There was a discussion between the panelists about the position of regulators and the way that they help or could potentially support more adoption. One of the ideas brought forward by the panel moderator Kristoff Zammit of Aquibix made, was benefits raised if regulators were to conduct auditing of certain processes themselves and certify pieces of technology.

Vasco De Fritas head of customer engagement at Electronic IDentification said the regulator’s engagement in Spain helped when they were going to clients, but they had to make the first move to get things moving.  “Some of the things we did in Spain was show the technology to regulators. We had customers really keen to use the tech, but they were always asking if the regulator really accepts this. We went to the regulator to show the technology and that our customers are willing to use it and pushed the regulator to say something about that, so they could start using it.”

Jumio’s Winchester added, there are regulators starting to adhere or replicate aspects of other regulators in other countries. This is something that he foresees continuing and ‘becoming almost more of a wholistic approach with some nuances.’

He said, “I think that we are already seeing regulators becoming more granular in their definition of what is and isn’t appropriate and I think that is almost a necessity to continue. Leaving things open ended, not giving appropriate detail just leaves confusion and ambiguity.”

Copyright © 2018 RegTech Analyst

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