Lots of huge financial institutions talk the talk about innovation, but few seem to walk the walk and actually implement RegTech solutions.
That is according to Remonda Kirketerp-Møller, the founder of RegTech startup muinmos, which helps financial institutions onboard clients in highly regulated and complex markets.
As a part of her job she is often attending events where banks, financial institutions and FinTech entrepreneurs discuss their challenges. And when they do, they all seem to agree that a solution to maximize their output is to automize their processes, including their regulatory compliance.
“The big banks come in and talk about how AI should look like and the adoption of it,” Kirketerp-Møller tells FinTech Global. “And it’s kind of interesting, actually, because the majority of them have not yet adopted it internally.”
This surprised her as muinmos was born out of the frustration with how time-consuming it was to ensure compliance with complex legislation for the financial institutions she worked for. “I strongly believe that we as people need to be challenged on any job and that the more challenged we are, the more creative we will become,” Kirketerp-Møller tells RegTech Analyst.
However, she points out that there is a difference between having a lot to do and actually being stimulated. “They’re two different things,” Kirketerp-Møller says.
Regulatory compliance in itself is one of those issues that can prove particularly time-consuming due to the complexity of laws. For instance, when the EU’s new Markets in Financial Directive (MiFID II) was first enforced, it’s estimated that it took over 30,000 pages just to understand it.
For a regular human being, it can take days if not weeks of administrative tasks to get through to sign up a client. “And, to be honest with you, [in 99.9% of the cases,] by the time they’re done with each client, they’re still not sure if what they did was accurate and in line with the prevailing legislation,” Kirketerp-Møller says.
“You just get caught up with fighting with 50+ pages and thinking ‘Oh God, did I check page one’ or ‘I forgot page ten’ and ‘what was the procedure on page nine again?’ It becomes routine work where the complexity is the sheer volume rather than it being an actual challenge.”
She argues that automating these administrative tasks will create more time, save money and enable businesses to focus on growth rather than dull work. “The second we think differently as people [about this], I believe it will strengthen the sector and it will make financial institutions perform even better,” Kirketerp-Møller says.
So why are banks seemingly hesitating to implement these solutions? Part of the reason for this is because many of the big financial institutions are burdened by legacy systems stifling innovation.
Another hurdle is that the bigger financial institutions get, the more people tend to be involved in decisions. “They have many decision makers that need to agree and, to be frank, having worked on the other side for many years, seeing it also from our side, a number of them lack imagination, they lack creativity. Implementing RegTech solutions requires deep understanding, imagination, creativity and the desire to move forward and make a difference for the financial institution” Remonda believes.
To make it even trickier, she believes many of the bigger banks and financial institutions and businesses do not have the leaders who can understand the challenge properly. Moreover, implementing a RegTech solution can be a lengthy process, meaning that the leadership could either be replaced before it has borne fruit or they simply lose patience with the process.
And in Kirketerp-Møller’s experience, there is often not anyone taking a lead to implement RegTech solutions in many banks and financial institutions. “Ultimately, there are no real owners of these projects and that’s one of the biggest problems, knowing who owns it,” she says. “Is it the legal department? Is it the CFO, the CTO or the even the CEO? and who is actually in charge of designing the specifications and seeing it implemented is an even bigger challenge since it is not easy to find these skill sets in-house.”
Moreover, in her experience financial services firms fail to put in budgets to implement these sort of solutions. “The majority of [technology] budgets sit in the front office,” Kirketerp-Møller says.
