The application of technology is changing the world of regulatory compliance, paving the way for transparency and integrity according to Madison Financial CEO Annick Donat.
With a wave of regulations threatening to plunge the financial services industry into chaos, technologies like AI and ML are promising to ease the burden on compliance officers and ensure firms are meeting regulations.
“The ability to learn from doing and harnessing the data, and the knowledge and process of others will mean that we can mass scale the intellectual property and experience within the entire ecosystem,” according to Donat.
“This is a powerful and important catalyst for changing the way we view regulation. I fundamentally believe in the good in people. RegTech will enable all of us to collaborate and demonstrate the importance of providing transparency and integrity in all our engagements with consumers. It is also an intelligent & positive way to monitor and shape the right behaviours,” she added.
Machine learning can be used to identify complex, nonlinear patterns in large data sets and create more accurate risk models. While the application of machine learning can be used in analysing unstructured data such as e-mails, spoken word, PDFs and metadata. Compliance officers can use this to handle customer protection and complains, monitor behaviour and internal culture in organisations, KYC regulations, or for the real-time monitoring of regulatory requirements.
Along with blockchain, these technologies have the potential to enhance the client experience, assist with co-responsibility of decision making and increase awareness and financial literacy of all constituents. However, Donat admits that it remains unclear how far these technologies can take can the regulated sector.
“No one knows for sure, however what these advancements may provide is the ability to remove the waste, subjectivity, duplication and interpretation that impacts the cost of doing business, which is a significant issue for small business owners.”
Within financial services the regulatory challenge is becoming more granular and targeted, with firms now ‘dealing with nuances’ that have been discovered as a result of the Future of Financial Services (FOFA) reforms according to Donat.
Introduced in 2013, the objectives of FOFA are to improve the trust and confidence of Australian retail investors in the financial services sector and ensure the availability, accessibility and affordability of high quality financial advice.
Since its introduction, many advice and wealth scenarios have been tested, interpreted, re-interpreted and this has given rise to more questions and ambiguity, thus creating the ‘perfect storm for RegTech’.
“RegTech has the ability to leverage years of experience, define clearly the problem we are trying to solve and provide lead measures to help our community self-regulate,” she added.
Australia has seen more than $19.2m invested in 13 companies since 2012 according to the Global RegTech review. iSignthis, a company specialising in identity verification and payment authentication, scored the biggest RegTech deal in the country by landing $7.4m according to the review. Panviva and Kyckr completed the second biggest deal in the sector by each collecting $4m.
However, despite rising levels in RegTech investment and the financial industry’s need for the solutions, the adoption of RegTech still appears to be a slow process.
“We are seeing a movement towards using RegTech to support the governance of products and services,” she added. Collaboration, awareness, sandbox environments, where multi-stakeholders are represented across industry, regulators, corporates & Governments, will all help overcome the barriers to adoption over time according to Donat.
“There are many regulations across many industries that have not yet caught up with the RegTech capability available today (however, that is not different to any step change i.e. driverless cars). My hope is we look up one day and RegTech is the way “we’ve always done business.”
Earlier this year, the Australian RegTech Association launched with a with ‘a clear vision to make Australia a global leader in building higher performing, ethical and compliant businesses through RegTech innovation and investment’. One of the associations CEO’s recently spoke to FinTech Global about RegTech coming ‘out of the cold’ to ease the pressure on compliance teams.
Copyright © 2017 RegTech Analyst
Copyright © 2018 RegTech Analyst
