The adoption of RegTech should not be pinned solely on regulators, more funding is needed from policymakers and legislators, according to panellists at the Global RegTech Summit 2018.
With the wave of regulations facing the financial services increasingly on the up, innovation in technology has risen with the promise to ease burden on compliance and risk officers. However, the adoption of RegTech has been relatively slow and the industry as a whole is yet to fully unleash its benefits. The panel at the Global RegTech Summit which included, senior staff from EY, Glass Box, MetricStream, SteelEye, and the ADGM Financial Services Regulatory Authority, discussed the impediments to the adoption of RegTech across markets, jurisdictions and regulators.
When asked what RegTech providers need to do differently going forward, Matt Smith, CEO of SteelEye, said to conform to regulations today, you have to ‘bring data together’. However, the reality of creating these data warehouses is hard and the current processes are inefficient.
His suggestion to RegTech and as a market is to look at the data and look at tech providers in the RegTech space that are ‘really thinking about the data’. “If they do that, then they will be able to help find opportunity beyond just the Regs,” he added.
Brenda Boultwood, VP of industry solutions at MetricStream, agreed that there’s a lot of repetition and inefficiency around the functions performed to get the data. However, she added in addition to its being all about the data, it’s really all about the buyer.
The buyer of technology, as an executive sponsor or the person with the courage to bring in new technology, is typically relatively senior in the organisation. They’ve made their career by creating a strong silo and proving to their management that they have the information.
“Now you’re asking this individual to take a risk on adopting new technology. But they look around and they say, look at the inefficient use of data. Look at the inefficient functions we’re (RegTechs) are performing redundantly across the company. I need to do the right thing for the company, but yet I’ve got to do what’s prudent.
She told the audience the challenge lies in getting someone to agree that it’s a lot better to give up your spreadsheet and SharePoint site, ‘their little siloed way of working’ and adopt something that’s common. As a result, the buyer may hand over control over what’s on the form or the types of reports that come out.
“That’s huge change you’re introducing to a person. That’s a big part of what we have to do as a RegTech firm, is empathise with that buyer”, she added.
Richard Teng, CEO of Abu Dhabi Global Market Financial Services Regulatory Authority, echoed his panellists views: “If you put yourselves in the shoes of the buyer today, they would like to have a one stop shop solutions for everything. Whereas if you look at a lot of different RegTech solutions out there, they tend to target different pockets. So, from a buyer perspective, I would like to have an aggregator coming in trying to offer a more holistic solution.”
RegTechs Vs Regulators
Following his comment, the panel’s moderator, Sajedah Karim, an associate partner at EY, asked what regulators could do to help the adoption of RegTechs.
Excluding Teng and ADGM, Matt Smith argued that regulators need to do more, not just to benefit the RegTechs, but to harness benefits for themselves. He claimed the ‘pain and burden of regulations’ comes down to regulators.
“It’s expensive. It costs money. It distracts from things that you should be focusing on. So, the more they (regulators) can do to help firms like us establish ourselves and meet the criteria of the regulations, the better.
“What we found is that you have some nice conversations with the regulators and it’s all friendly and they profess to want to do more, but they just aren’t.”
He also suggested that if the regulators did offer more support there is benefits, not just indirectly by the market conforming with better tools and technologies and capabilities, but for the regulators themselves. “We’re here for them as much as we are for you,” he added.
Boultwood agreed, arguing that a lot of organisations would be shocked to see how manual the regulatory process is. Like her fellow panellists, Boultwood suggested that regulators get out there and adopt some of these technologies themselves.
“Why should every regulated entity under your jurisdiction manage all the change that’s happening in the regulator space individually. Why couldn’t that be a service provided? Not necessarily by the regulator, but perhaps by a consortium utility that the regulator sanctions or promotes,” she told the audience.
“There are a whole host of examples of how greater kind of sanctioning by the regulators could promote more technology adoption by the regulators adopting it themselves.”
The regulators also need to go there and be more proactive according to Simon Crowe, EMEA sales director at Glassbox. They need to actually endorse technology in the market. “My feeling is there’s a little bit too much of actually sitting on the fence,” he added. “The advantage is that we then don’t have every single financial services institution going out there and having to reinvent the wheel for themselves.”
Richard Teng jumped to the defence of regulators, suggesting the biggest challenge was to make sure that the policymakers and the legislators fund this area properly.
He said ADGM is lucky in the sense that its leadership has full faith in what it is doing and has funded this area properly. However, that’s not the situation facing most regulators.
“So, you need separate funding. You probably need a different team looking at these areas, and talent retentions as resource retention is a huge issue for regulators. We can go through Series A, series B funding to raise more funds to burn in this area and every time some of the FinTechs and RegTech firms have good experience working with a particular regulator. Don’t pin everything on the regulators. We need a total mindset change looking at the issue from a more holistic perspective, convincing the policymakers and the legislators that this area needs much more funding.”
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