One of the fastest growing areas over the past five years has been the RegTech space. The dynamic and shifting regulatory landscape has continually necessitated new solutions and measures to meet growing compliance regimes. Susanne Chishti, the founder and CEO of FINTECH Circle and FINTECH Circle Institute, clarifies for us what RegTech entails exactly, outlining the segment’s growing clout in the industry and the benefits that it brings.
RegTech has become a buzzword in 2017. Can you briefly explain what it means?
The FCA defines RegTech as a subset of FinTech that focuses on technology that facilitates the delivery of regulatory requirements more efficiently and effectively than existing capabilities.
In summary, RegTech addresses regulatory challenges and helps with the delivery of compliance requirements towards governments and regulatory bodies such as the FCA or Bank of England. RegTech supports both existing and new rules and regulations.
MiFID II aside, what are the biggest problems that RegTech solves?
RegTech addresses top compliance concerns – last year alone more than 50,000 regulatory alerts were issued by more than 700 regulatory bodies globally. It is almost impossible to keep up with this surge of regulation unless you use technology to analyze and respond to regulatory requirements in a more automated and structured way.
In Europe, in addition to MiFID II, we also work on the “Fundamental Review of the Trading Book” (FRTB) relating to higher capital requirements and a stricter separation of the trading and banking book for large, internationally active financial firms. We also work on the “Packaged Retail and Insurance-based Investment Products” (PRIIPs) Regulation, which will make it easier for retail investors to compare products, increasing customer value.
Finally, the General Data Protection Regulation (GDPR) became effective in May 2018 to safeguard the storage and transfer of client data, which will require firms to consolidate existing data pools to get an enterprise-wide view of data. It will be impossible to comply with all the above rules unless firms leverage FinTech and RegTech.
What are the features that set RegTech apart from FinTech?
I agree with the FCA definition that RegTech is a subset of FinTech. Interesting areas of further development could be how regulatory technology is applied to asset management & private banking (which is also referred to as “WealthTECH”). Also additional areas include the insurance sector (“InsurTech).
The RegTech Book, The InsurTech and The WealthTech Book are part of our FINTECH Book Series published by Wiley in Q1 2018 to provide financial services professionals, investors, entrepreneurs and visionaries with insights and practical case studies from our FinTech ecosystem on how technology is leading to a structural change in the financial services sector globally.
The best way to learn about these trends already now is the FINTECH Circle Institute, which provides short, online courses on all topics above including enterprise innovation, blockchain, artificial intelligence etc. You can enroll in these self-paced courses (up to 1 hour long) for FREE until Dec 2017.
What are the most exciting RegTech startups and projects that London Summit delegates should know about?
There are more than 60 European RegTech companies focused on financial services. Outside the US, the UK leads with a 37 percent deal share. There are many fantastic RegTech companies such as AlgoDynamix, Alyne, BehavioSec, ClauseMatch, Contego, Enforcd, Onfido, Qumram, Railsbank, Scaled Risk, and Kompli Global.
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As a keynote speaker during the 2017 Finance Magnates’ London Summit, Ms. Chishti will discussing the latest developments in RegTech while also explaining where the field is heading.
Kompli-Global, for example, has developed the world’s first networked, multi-jurisdictional, multi-lingual due diligence, search platform. It is transforming the financial crime and regulatory compliance space by combining cutting-edge Artificial Intelligence technology, human expertise and effective processes.
Kompli-Global enables businesses to perform quick, thorough customer due diligence checks in an increasingly complex and regulated environment.
You recently launched the FINTECH Circle Institute. What market demand is this meeting?
We conducted a study, which found that so-called “FinTech experts” might not be as knowledgeable as they claim. Our research uncovered that 94 percent of financial services professionals suspect their colleagues of using buzzwords such as “Blockchain” and “Artificial Intelligence” without understanding their meaning.
A further 22 percent say financial services professionals are putting off developing their digital skills out of fear that it’s too late to catch up with existing FinTech experts.
I personally think it is worrying to think that financial services professionals believe it’s too late to build their digital and FinTech skills, while others are bluffing their skillset. As our study showed, there is a direct link between genuine digital knowledge and promotion prospects.
We’ve developed the FINTECH Circle Institute to empower financial professionals with practical FinTech knowledge both to cater for existing demand but also long time where digital skills will become even more critical due to increased automation even among highly skilled employees.
That’s why we launched The FINTECH Circle Institute as a peer-to-peer (P2P) online learning platform, designed to empower finance professionals with the necessary digital skills to adapt to the rapidly changing industry. We have a fantastic advisory Board with leaders from banks and FinTech experts, through to academics from leading universities, such as the University of Cambridge, Warwick Business School and UCL.
Is the industry educated enough? Which topics are of particular interest to students?
Our study showed that much more education is needed. The majority of financial services professionals believe that promotions should favor the most tech-savvy employees, meaning traditional financial services experts could be at risk of falling behind their digital-friendly colleagues.
Of the 1,400 people questioned, 84 percent claimed that colleagues with advanced digital and FinTech skills, but half the years of experience, are more deserving of promotion than a colleague who has been in the industry for at least ten years.
The industry professionals questioned felt that the lack of training within financial services organizations was the biggest factor preventing some employees from developing their digital and FinTech skills, with 69 percent making this claim.
FinTech is complex and it changes all the time – so it’s a challenge for us all to constantly keep on learning new business models, new technology innovations and to stay open for change. Change will be the only constant going forward!