Australian RegTech companies are among the most advanced in the world, but they face challenges in having their solutions adopted by the large organisations largely because of inflexible procurement practices.


This was one of the key messages at an event in the FSC’s Technology Workshop series on the RegTech industry, at which moderator Samantha Clarke - the chief executive of Advise RegTech - opened by quoting a Boston Consulting Group report which ranked Australia third in global RegTech development.

With significant new impetus from the recent Hayne Royal Commission into Financial Services, Clarke said that RegTech is the “now technology” of 2019 and offered solutions to issues of compliance, transparency and trust - but only if they could be widely adopted not just by financial institutions but also by regulators.

Deborah Young, the chief executive of the RegTech Association, said the group had been formed less than two years ago “out of the frustration of tech companies being able to access large complex companies to sell their technologies.”

“This happens everywhere where you have scale-up or young companies who have the solutions to big bank problems, but are unable to find the right people at the right time,” said Young.

“Clearly there is fatigue which happens on both sides. The small companies are getting very tired of speaking to all the wrong people and the large companies are getting tired about the wrong people talking to them about the wrong thing.”

A key issue for banks, said Young, was in their procurement practices.

“How can they do procurement differently for a scale-up or a start-up, which is not going to be able to afford the normal two year time frame because at least 12 months of that is going through the process,” said Young.

“This is where the rubber hits the road in terms of adoption.”

From RegTech start-up Verifier, founder and chief executive Lisa Schutz said that collaboration between all players in the sector was a key to adoption, and she had seen positive signs when her company hosted an Anti Money Laundering “boot camp” in 2018.

“The banks said ‘you RegTechs get yourselves together and get yourselves into flotillas of end-to-end usefulness, because it’s impossible for us to buy ten of you,’” said Shutz.

“And the other piece was that the RegTech’s turned around and said to the banks: ‘Guys, it would be really helpful if you knew how to procure technology in your compliance teams, because we don’t really want to coach you and you leave it to the last minute.’”

Schutz said that she had observed the beginning of collaboration at the event, where regulated entities, which were natural competitors, were sharing information on fast tracking procurement, with a growing understanding that a new approach was needed.

“We have this creative explosion in terms of the variety, what we can call the API economy,” she said.

“Each of these firms are specialty firms, which do something really well and do best in class, so instead of the banks buying the big automation stack from a big vendor they have the opportunity to curate a lot of best in class ‘mini bits’ if you like and put them all together, but that means there is a challenge on both sides.”

One organisation which has always taken responsibility with helping clients with compliance is RBC Investor & Treasury Services, which hosted the event with the FSC.

RBC’s Asia Pacific Director of Full Service, Product, Justin Burman said that in his view the global banking community had “embraced Fintech and RegTech” solutions through the establishment of innovation laboratories as a key focus, “all within a commercial lens of reducing cost and improving the experience.”

“My intuition is that we have seen a change from global organisations in terms of embracing the technology and moving forward from that procurement angle,” Burman said.

“We need to collaborate on best practice approaches to meeting regulation costs effectively so the client doesn’t bear the burden of compliance.”

In Australia, Burman said RBC was increasingly engaging with small technology companies “to create micro-solutions where they really push us forward in terms of capabilities.”

He said he believed the two year procurement cycle was “coming down because the barriers to entry are coming down as procurement becomes more familiar.”

The fourth panel member, Harold Lucero, the chief executive and co-founder of education and financial inclusion provider Discidium, said that while it was “not easy to promote new technology” the Royal Commission report had opened up that opportunity.

He called on those working in financial institutions, particularly those which were not already doing though programs of digital transformation, to “instigate and take ownership” of the push towards RegTech solutions.

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