Banks must continue outsourcing to keep up with technology and regulation, according to a panel at the Global RegTech Summit 2018.
With the regulatory pressure continuing to grow, reaching compliance can mean the difference between success and failure for financial institutions. Regulation has become tighter than ever, while banks have been trying to find creative, more cost-effective ways to undertake day-to-day business operations, including outsourcing.
The KYC panel at the RegTech Summit included senior staff from KYC Portal, Electronic Identification, Jumio, InfoCert and Bureau Van Dijk. During the discussion, the panel highlighted how outsourcing can benefit financial institutions.
Carmine Auletta, chief innovation officer at InfoCert, told the audience: “Being a qualified trusted service provider means we are strictly regulated exactly like banks. We take the fall liability for what we do in terms of customer identification, digital transactions and so on.
“Banks rely on us to outsource the identification process and for the full liability. That makes it much easier for them. From a bank’s perspective it will put all the liability that will come from GDPR, for example, on us.”
Banks have learnt from previous mistakes, setting up new standalone-units so that they can isolate support services from main profit-generating businesses. This enables banks to maintain focus on profit-generation, whilst providing peace of mind that the regulatory changes are being incorporated into back-office processes by specialist expertise in this area.
“It is providing customers with the confidence that you can represent their brand, protect their consumers, and be compliant,” Simon Winchester, global partnerships & head of financial services EMEA at Jumio, added.
“Compliance is definitely one of the words for the year and I’m sure we’re going to be talking about it a lot more. In terms of businesses outsourcing or building internally, in this day and age it’s pretty hard not to outsource. We live in an era of digital Darwinism where society and technology are evolving at a quicker rate than business can keep up with.”
He discussed how the rapid change in relationship is changing the relationships between FIs, tech disruptors, society and consumers.
“It is hard enough for businesses and RegTechs to continue to innovate and keep up with that change, let alone for FIs whose primary goal is to build a financial product to better service their customer base. You have to look to outsourcing to adhere to those tough requests, “ Winchester added.
Vasco De Freitas, head of customer engagement at Electronic Identification, agreed with the importance of outsource in a heavily regulated industry.
“The bank has to focus on its business and we as a RegTech focus on tech. We are good at that.” He echoed his panelist’s comments, claiming outsourcing is crucial as it enables ‘better players’ to do what they are good at.
During the summit, the panel also suggested that RegTechs should focus on going for smaller branches and countries to prove their technology works, which in turn will make it easier to scale up. They also discussed ways RegTech can be adopted by financial institutions and the benefits of on-boarding the solutions. One of the issues talked about by the group was the lack of clarity on who was the right person to speak with when communicating with these organisations.