When it comes to regtech, going it alone isn’t an option
We spoke with Chris O’Driscoll, head of disruptive change at PA Consulting Group, about why collaboration is so critical for regtechs and incumbents.
Why is collaboration important for regtech?
If I think about the word “collaboration” in the context of regtech, it’s not about two similar organisations pooling ideas or resources. For me, it’s about any firm that has a stake in technology as a means to simplify compliance becoming part of an ecosystem.
I’d include banks, insurers, asset managers, regulators, tech firms, consultants, accelerators, and academics in that eco-system. They all have something to bring to the table to support the regtech industry.
Is this ecosystem already in place?
I think we’re starting to see it, and the recent RegTech Rising event was a great example of bringing these diverse stakeholders together. But I think there’s always more to be done to create opportunities for collaboration.
What can financial firms and regtechs do to collaborate more effectively?
Earlier this year, we spoke to a number of firms, both financial institutions and tech firms, about their specific challenges with adoption of anti-money laundry (AML) technology. And I think the challenges they highlighted are fairly representative of the wider regtech space.
Financial services firms and tech firms were often frustrated by not enough regulatory guidance. I think this is a great example of where open dialogue and collaboration between regulators and industry to understand rationales and motivations can help alleviate some of this worry.
Also, some tech firms we spoke to often struggled to accurately represent themselves and their capabilities to the large financial services providers who are worried about investing in unproven technology and the associated risks to their business. Finding ways for tech firms and financial services providers to engage informally to get to know each other better will break down some of these barriers.
At the end of the day, I think it’s about getting out there and just doing it! The world’s changing so quickly, and every day there’s a new and exciting development that could change the way we work. For example, a regtech update that’s really struck me lately has been the partnership between Investment Navigator and Avaloq around core banking.
Speaking regularly to peers across the eco-system helps you to be forward looking and prepared for what’s coming next.
If we’re all busy networking and collaborating – where does that leave competition? Does it still have a role to play?
Financial services firms and technology firms will still compete with their peers for customers – that’s not going to change. In fact, as the playing field is levelled post-Open Banking and PSD2, competition may in fact sharpen with more players offering new products coming to market. But value propositions will have to be unique and compelling for firms to win out from the rest.
I think we’ll also see competition between older, traditional financial services firms and newer platform businesses. Incumbents will need to find a way to have a role in a more platform economy or risk losing ground. For example, if firms like Google, Facebook or Amazon enter into financial services, how do banks or insurers find ways to collaborate with them?
What else is critical to a regtech’s success?
It’s a new world out there, and firms can’t keep doing the same thing and expecting a different result, and you need to be bold in your approach. So, a lot of it comes down to a firm’s culture and attitude to new ideas. Compliance can be a hard nut to crack because, fundamentally, it’s about protecting the business, so trying new things which are unproven is hard to justify. But the current approaches aren’t sustainable.
Traditional financial institutions aren’t known for constantly breaking the mold with innovative new thinking. So it follows that it’s outside of the four walls of the organisation that innovation is happening! Dedicating time and resources to being part of that network of innovators is essential.
But justifying that time and resource can be a challenge. You need leaders who see beyond a direct return on investment to the longer term benefits of outside relationships. In a regtech context, that might be about understanding the different perspectives and challenges of the various players which can help you make better decisions for your own firm.
About Chris O’Driscoll
Chris has a passion for big data, digital and innovation. He thrives helping clients change and grow their businesses through the effective and innovative application of data and technology.
Chris has spent over ten years in the financial services industry and two years in ecommerce; involved in the design, build and implementation of innovative personal finance management tools and fintech developments in banking and insurance.
He holds degrees in mathematics and financial markets and has experience and understanding of technology enabled business transformation across global markets, including commercial banking, retail banking, insurance, Islamic finance and multichannel retailing.
About PA Consulting
PA Consulting is a different kind of consultancy – we’re a firm of innovators who believe that people and technology coming together, through innovation, is a powerful force that’s the key to surviving and thriving.
We have over 70 years’ experience across consulting, technology and innovation. We define success as achieving exceptional results that have a lasting impact on businesses, communities and individuals worldwide. This principle has remained the cornerstone of our ethos since 1943 – and it continues to underpin everything we do.
Our clients choose us because we challenge convention to find the solutions that really work in practice, not just on paper. Then we roll up our sleeves and get the job done.