Financial Services Blog

As we discussed in our introductory blog, regulatory technology (RegTech) companies, capitalizing on advances in technology, have emerged as potential viable solutions to evolving regulation in the financial services industry. Venture capital firms have continued to pour money into RegTech, while financial services firms, although recognizing that modernization of compliance functions is essential, are just starting to embrace RegTech on a significant basis. This makes 2018 a pivotal year for RegTech adoption.

Accenture’s recently completed 2018 Compliance Risk Study, which surveyed executive-level compliance professionals from 150 financial services firms across 13 countries, showed the following key statistics for respondents related to technology:

  • Within the next 12 months, 57 percent of compliance respondents rank compliance technology transformation as one of their top three strategic initiatives
  • In the next 12 months, nearly half of compliance executives surveyed are planning to leverage innovative technology such as surveillance tools as part of their compliance operating model, and move towards adopting artificial intelligence capabilities over the next 3 years.

While we believe the current environment encourages adoption of RegTech, there are still major barriers to achieving effective collaboration among Financial Service firms, RegTech companies and regulators.

 For Financial Service firms, barriers include:

  • Lack of budget: FS firms tend to budget for business as usual, not innovation. RegTech companies typically require significant investment, which cannot be supported with existing compliance budgets.
  • Limited appetite for risk: Executives are typically not incentivized to take on risk or innovate by investing in newer capabilities.
  • Uncertain regulatory landscape: Today’s ever-changing regulatory landscape creates difficulties in choosing where to invest in compliance modernization.

 Barriers for RegTech companies include:

  • Complicated approval processes: Lean start-up RegTech companies often face difficulties with the complicated and burdensome approval processes needed to engage with FS firms.
  • Dealing with legacy systems: Many FS firms are burdened with outdated technology and siloed organizations using disparate architectures and legacy system/applications.
  • Inability to meet client needs: An engineer/technology-focused mindset is usually concentrated on product and, in some cases, shows unwillingness to accept feedback and/or adopt updated offerings to meet the firm’s needs.

 Regulators face their own hurdles, as well:

  • Unwillingness to articulate specific positions: Our observation is that regulators have been unwilling to articulate specific positions regarding industry areas of focus related to RegTech.
  • Continuing uncertainty about implications of RegTech. Regulators are showing support for RegTech, but they are not seen as driving the agenda, partially because of the need to remain impartial and possibly because of the lack of a full understanding of the implications of these technologies.
  • Limited appetite for risk: Shortage of technology expertise appears to have led to a conservative approach to adopting new technology, and contributing to uncertainty and indecisiveness.

None of these issues are insurmountable. Effective collaboration among Financial Service firms, RegTech companies, and regulators can help address these challenges.  There is a current misalignment of focus, with industry associations focused on issues and RegTech companies focused on specific products.  When groups work independently they may not solve the larger problems. Cross-stakeholder expertise, combining tech knowledge with business skills, can help bridge these gaps.

Within Financial Service firms and regulators, there are regulatory experts, and within RegTech companies there are engineers. The combined knowledge and experience of these stakeholder groups can be harnessed to solve the most pressing challenges. Additionally, it is in all players’ best interest to collaborate, and, in some instances, to compromise to achieve the best results.

Specific actions that each group can take include, but are not limited to:

Proposed Actions for Financial Service Firms:

  • Define targeted use cases. Define fit-for-purpose use cases that demonstrate a strong return on investment (ROI) to drive business decisions. Investment in regulatory software can result in an ROI of 600 percent (or more) with a payback period of under three years. But firms are encouraged to invest time and resources up front to benefit from such gains.
  • Be transparent. Agree upfront on the scope, timeframe, and exit strategy for the proof of concept (POC) with RegTech companies. Consider streamlining the POC approval process and creating a “fast track” procurement process for RegTech companies.
  • Plan long term: Obtain internal buy-in through building consensus around actions like planning and moving to an open architecture that facilitates easier introduction of RegTech into the organization.

Proposed Actions for RegTech companies:

  • Learn to speak the same language as Financial Service firms. Understand regulation, compliance and security roadblocks (the top reasons for not proceeding with a proof of concept, according to 60 percent of financial services firms participating in the FinTech Innovation Lab NYC program)1 and work alongside FS firms to develop solutions.
  • Understand specific business and industry needs. Many new RegTech companies have developed solutions without a specific problem in mind and are trying to make an out-of-the-box solution work for an unrelated problem.  Consider hiring industry specialists and experts to help tailor solutions to the firm’s real problems.
  • Engage regulators. Meet with regulators early and often to obtain their guidance and point of view, taking advantage of their hosted “Office Hours,” accelerator programs and other opportunities.

Proposed Actions for Regulators:

  • Continue to promote innovation. Actively promote and participate in regulatory sandboxes to gain early understanding of evolving technology and potential risks that may need to be addressed.
  • Collaborate with other regulators globally to gain a common perspective.  Regulators can coordinate and communicate among themselves to ensure that FS firms and RegTech companies receive consistent messages. For example, regulators in Singapore and Australia have participated in a bridge program to support innovative businesses.
  • Continue to be flexible and open-minded. There may be situations where regulation should be updated to facilitate the adoption of RegTech.  As mentioned in our previous blog, an example of this might be updating record retention requirements to utilize blockchain technology.

The key to success for all parties, whether financial services firms, RegTech companies or regulators, is more effective collaboration.  Active collaboration creates a higher probability that organizations can effectively solve challenging regulatory and compliance issues facing the financial services industry.  By actively working together on these issues, stakeholders can accelerate proof of concept, open clear channels of communication, and gather constructive feedback to strengthen industry growth opportunities.

This blog series will continue to focus on collaboration among financial services firms, RegTech companies and regulators.  In our next blog, we will look at the different paths Financial Service firms can take in adopting RegTech and explore elements for success.



The FinTech Innovation Lab NYC helps early- and growth-stage FinTech companies accelerate product and business development. Co-founded by Accenture and the Partnership Fund of New York City in 2010, the FinTech Innovation Lab is a program for entrepreneurs that are developing disruptive, pioneering enterprise technologies for the financial services sector. Until the Fall of 2017, the Lab had provided entrepreneurs from 47 technology companies with mentoring and access to more than 35 leading bank CEOs, CTOs, CIOs, venture capitalists and technology luminaries. To find out more:

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