As fintech companies continue to innovate and disrupt traditional banking, they often find themselves grappling with a complex and ever-changing regulatory environment. To thrive and remain competitive, these startups must strike a delicate balance between offering cutting-edge financial products and ensuring compliance with stringent regulations.
Building and maintaining risk orchestration systems from scratch can be a daunting and costly task, diverting valuable resources away from core business activities.
This highlights the importance of finding a more efficient way for fintechs to manage risk and financial crime while focusing on their core strengths—innovation and delivering exceptional user experiences.
In this week’s Behind the Idea, we chat to Edward Vaughan, risk and financial crime technology leader at LexisNexis Risk Solutions, to learn more about risk orchestration and the company’s innovative RiskNarrative™ platform.
Tell us more about RiskNarrative and its offering
At LexisNexis Risk Solutions, we recognise that financial crime risk and regulations are constantly shifting. Organisations must adapt rapidly to these changes with operational agility. RiskNarrative is our answer to this challenge.
It’s a no-code configuration platform that seamlessly integrates into businesses and contains all the necessary risk controls, workflow and orchestration to meet regulatory and commercial objectives in the realm of risk and financial crime.
This platform empowers business units to configure workflows using natural language and drag-and-drop features, all within an intuitive interface. Our solution focuses on three core elements: onboarding, ongoing monitoring and transactional monitoring, collectively referred to as customer lifecycle management for risk and financial crime.
What sets your platform apart?
While there are many tools out there in the marketplace today, RiskNarrative distinguishes itself through its unified decisioning engine. It brings together data and insights from various processes to make informed decisions.
Additionally, our platform benefits from LexisNexis Risk Solutions’ 30-plus years of experience working with global tier-one banks, offering a depth of insights and capabilities that are unparalleled in the market. We blend new technology, orchestration, decision-making, data, and services into a single platform, providing our clients with a holistic solution.
We’re also deploying the richness of capabilities that we have within our global organisation.
How are fintechs approaching risk orchestration?
Fintechs, especially emerging startups, often aim to differentiate themselves in a crowded market. Either in terms of the richness and capability of the products and services that they’re delivering or the user experience within their solutions.
Typically, those might be app-based banking solutions. Many of them opt to build their risk orchestration systems from scratch to have full control over their processes. They may leverage elements of the banking-as-a-service ecosystem but often attempt to build everything themselves.
Do fintechs need to change this approach, and why?
Building risk orchestration from the ground up can be a costly and time-consuming endeavour. Based on our analysis of typical self-build orchestration costs for a mid-tier UK bank onboarding around 100,000 customers and processing an average of two million transactions per year, we believe a self-build approach can cost almost three times more than investing in a specialist plug-and-play alternative.
Over the course of three years, this could mean fintechs are spending millions of pounds more than they need to. As well as the cost, self-build diverts valuable development resources away from building core differentiators and improving the user experience. More importantly, self-built solutions may not meet regulatory requirements adequately and may lack the robustness necessary to protect customers effectively.
Why does a self-build risk orchestration platform prove more expensive?
Self-building risk orchestration platforms can be expensive due to several factors. First, it requires significant development resources, which could be invested in other critical areas. Second, maintaining and updating a bespoke system adds ongoing costs.
Finally, self-built platforms may not achieve the level of sophistication and effectiveness provided by specialised solutions, potentially leading to regulatory fines or reputational damage. Looking at our analysis, we think a fintech could save around two-thirds on development and operational costs over the first three years, by investing in a risk orchestration platform, rather than building their own solution.
What’s the best advice for fintechs looking to buy a risk orchestration platform?
The best advice for fintechs is to partner with a proven, trusted market leader in risk technology. Look for a partner with a modern, forward-facing technology stack that seamlessly integrates with your systems to achieve your commercial objectives.
Ensure that the provider has a track record of delivering rich insights and capabilities to protect against risk and financial crime. Fintechs should consider partnering with established risk technology providers like LexisNexis Risk Solutions to save on development efforts and focus on driving their businesses forward while ensuring compliance and customer safety.
What’s in store for the future?
We are committed to further investing in scaling the RiskNarrative platform globally. We will continue enhancing the platform’s features to offer even more robust risk protection across the customer lifecycle. While I can’t reveal all our plans, expect exciting developments and innovations soon that will shape the future of risk orchestration.