The latest webinar brought to you by The Fintech Times is on Regtech and the gaps between regulation and innovation. Hosted by Mark Walker, Editorial Director of The Fintech Times, together with Charles Delingpole, CEO at ComplyAdvantage, Jane Jee, CEO at Kompli-Global, and Andrew Churchill, Security Consultant & Researcher.
Regulation is a hot topic all across fintech but is often criticised for lagging behind the extensive and fast-paced innovation of the industry and can be thought of as a barrier to fintech success. However, regulation is also crucial in order to help safeguard the industry and its consumers, especially when dealing with financial emergencies. In this webinar, our panel will discuss the parts of fintech that need better supervision, recent changes in regulation and how new regulation can keep up with changing financial needs in terms of geographical considerations.
The session started with each of the panellists introducing themselves. Charles Delingpole introduced ComplyAdvantage as a company that produces data and technology around anti-money laundering and anti-terrorist financing. Kompli-Global, represented by Jane Jee, who is also a member of the advisory group of RegTech Women, is a company that provides software mainly to regulated entities with a remote onboarding platform. And finally, Andrew Churchill is an independent security consultant and researcher who has worked for 25 years in the cybercrime space and the lead author of the British standard in digital identification and strong customer authentication.
Mark kicked off the discussion by stating that “regulation always seems to be chasing innovation” and invited the panellists to comment on the dynamic between disruptive companies and their regulators. Charles said “What we’ve seen in fintech more broadly in the past five years is an explosion of innovation, with every single vertical suddenly being invested in and scaling very very quickly.
“As a force regulation tends to favour large very wealthy incumbents who can afford to invest very heavily in managing, shaping and cultivating regulation. At the same time, regulation will protect consumers from losses. I think part of it is a whack a mole process which evolves in response to huge scandals and risk. So, in terms of chasing innovation, what we’ve seen is lots of different risks pop up and lots of different concerns both in terms of the consumers being protected but also the incumbents being protected as well.”
Jane, who advised she has previously qualified as a barrister and so understands that legislation takes time to put in place, agreed with Charles saying that regulation favours large companies. “Regulation also quite clearly lags a long way behind the evils that it seeks to remedy. PPI took years to be recognised as an issue, and if you look at the thousands that have been paid out because of that, that’s just one example of where regulation should have stepped in much sooner.”
She continued “As we all know by now the Buy Now Pay Later Situation has been recognised now as something that is potentially harmful to consumers and they are going to address it. But when they’re going to address it and how long it takes to get the right legislation in place is always an issue.
Andrew commented with a “glass half empty approach”, stating that “regulation was way behind any innovation, particularly when that innovation is trying to counter organised crime.”
“If you think back to PSD2, which we’re still talking about and getting ready to implement, we kicked off the legislation in 2010. Four years later in 2014 a document actually gets legislated and is already out of date. We still haven’t started the implementation process on that, so we are 10 years behind organised crime.
However, Andrew advised that with the number of digital sandboxes in the UK, and the global sandbox being considered as advised in the Kalifa review, this situation provides an opportunity to work closely with regulation. “I think we could actually see innovation and regulation go hand in hand with the safe space for innovation to play out and try new technologies to tackle the problem, rather than merely having tick-box compliance exercises.”
In terms of the panellist’s hopes and expectations for compliance moving into 2021, Charles said: “Regulation is where it is because of where technology is. And therefore, as we invest in technology hopefully the frontier of what we can enforce should also expand, so hopefully, the underlying risks and threats and crimes should be able to be extinguished, if not managed much more favourably.
Jane continued this optimistic note, saying that “I think that things will undoubtedly get better. My sadness is really that the technology exists now to stop financial crime and prevent criminals from being taken on by financial institutions. The pity is that it seems to take a long time for banks and regulators to catch up.
“Banks are quite understandably afraid of taking on new technology which isn’t approved by the regulator. You can’t blame them because they’re spending a fortune on compliance, however, fraud is a third of all crimes so there’s massive pressure in the market, and I hope that pressure leads to some very positive outcomes.
And finally, Andrew said “It’s obviously been depressing that we haven’t seen action coming through more effectively in the past.
“As we’ve seen in the budget, financial crime is now being taken seriously. And I think that now we’ve got that political mandate out and the authority coming through from that I really do think that the regulators will actually be very keen to work with innovation to find new ways of clawing that money back.”
To watch the webinar in full, click here