The RegTech Revolution: Rewriting the future of financial services

For the most part, firms have weathered the implications of Brexit and although generally political challenges remain, this does not reflect a fundamental issue with international financial services. Local M&A activity continues to grow and scale, proving firms are succeeding in the current market.

Financial services sector employment stands at a record high of 13,900 with Statistics Jersey reporting that jobs in the ‘accounting and compliance’ space are up 33% over the past five years. This is positive for the Island’s economy and opens up an important question of sustainability and ensuring that both employment and productivity are considered when measuring growth.

Jersey Finance and Jersey Business have both undertaken excellent initiatives aimed at improving productivity on the Island. Digital Jersey are championing the use of technology as a capacity creator and within our own back yard at Vaiie we debate whether we deliver regulatory risk tools or productivity tools.

RegTech, short for regulatory technology, is primarily a set of productivity tools designed to help financial institutions and other regulated entities manage and navigate complex regulatory compliance requirements more efficiently and effectively. It employs technology, including artificial intelligence, data analytics, biometrics, and automation, to streamline compliance processes, reduce human error, and enhance the overall compliance position of companies.

The Jersey Financial Services Commission are a pro-tech regulator, through policy change, outreach initiatives, and their Innovation Hub there has never been a better time to be a RegTech provider or buyer. But even the JFSC's commissioned research ‘RegTech in Jersey: Closing the gap between ambition and reality’ states that 32% of firms have access to some of the information required but are not sure they are screening RegTech vendors reliably. So, how do firms facing productivity challenges find the right technology partner?

Look for the highest common denominator – The Financial Action Task Force’s (FATF) decision process for regulated entities asks, ‘Is the digital ID system authorised by government for use in customer due diligence?’. Vaiie’s Identify product powers the Government of Jersey’s JerseyMe solution, as a result, Vaiie customers can be assured that Vaiie already meets FATF guidance.

Are the right information security practices in place? – Are vendors practising what they preach, is there a record of them talking about information and cyber security and can they answer your security questionnaires? At Vaiie we take information security incredibly seriously, we have obtained ISO27001 accreditation from the British Standards Institute in recognition of our information security management systems.

Who else uses the vendor? – If the solutions are good enough for your competitors, are they good enough for you? Take time to explore what sector and calibre of companies use the vendor and how long those relationships have lasted. If there are client testimonials, are they insightful? At Vaiie we work with the biggest names in the financial, insurance, telecommunications and energy sectors making us one of the largest offshore data handlers.

Do RegTechs understand the local and global market? – In the financial services industry compliance and reporting standards can widely vary across each jurisdiction a business operates in. At Vaiie we are proud to call Jersey our home, but we recognise that for many of our clients it is just one of many operating jurisdictions they need to consider. Our workflows can be adapted to meet jurisdictional peculiarities or super equivalent house standards. When it comes to product development, we work with our partners to understand problems faced across their entire business and deliver appropriate solutions.

Does the solution integrate with existing systems or allow you to decommission old ones? - Many financial institutions still rely on outdated legacy systems that can be inefficient and costly to maintain. A report by McKinsey in 2019 found that large banks spend up to 80% of their IT budgets on maintaining legacy systems. It is crucial that the right RegTech partner can deliver operational efficiencies by connecting to business-critical systems or deliver a solution that allows you to remove legacy systems. We have experience in both integrating customised solutions into legacy systems to make them more adaptable for the future and delivering entirely new systems built to evolve as regulations change.

Understand your own processes – If you have great processes already in place then deviating from them can be a leap of faith. However, whether you have great, broken or fundamentally flawed processes in place, understanding where you are now and making sure you implement the right solution to meet all of your business needs is important. An off the shelf RegTech product can be a fast solution for now, but is it meeting all your requirements and preparing your processes for the future? If you have great processes already in place, then deviating from them can be a leap of faith. At Vaiie our approach is a consultative one, we standardise solutions and workflows but also work with clients to understand the problems they are trying to solve, and we have highly configurable solutions that meet these needs so our clients can have the best of both worlds.

Is branding and control of your own brand experience a key factor? – When it comes to providing critical “know your customer” information such as passport information or address verification, the end client is right to ask who the RegTech firm is and if their data is safe. If your system is not appropriately branded, will your client be secure in sharing their confidential information with you? Vaiie’s Identify and Onboard products have configurable branding elements to deliver efficiency improvements through technology while maintaining trust with the end customer.

Is the solution intuitive and easy to use? – Onboarding processes vary from business to business which can lead to an end client abandoning their onboarding journey quickly if a system is not easy to navigate. If a client needs to access a tutorial or request additional assistance to complete the journey, often they will simply move on. Vaiie applications are built with the end users in mind, our user centric approach and comprehensive suite of user personas allow your teams or end customers to pick things up with ease reducing the time spent on training and upskilling.

There are of course more questions to ask, and these will vary across regulated entities depending on their own unique priorities. However, as technology continues to advance, and regulatory requirements become increasingly complex, the role of RegTech in enhancing productivity and shaping the future of Jersey’s financial services industry will become even more significant.

RegTech will enable increased productivity, cost savings, and enhanced compliance. It will continue to play a pivotal role in helping financial institutions meet regulatory requirements while providing better services to their customers. However, it's essential to find the right partner who can help you navigate the regulatory landscape carefully, as the industry evolves, and new challenges and opportunities emerge.

If you would like to find out more about Vaiie or the ways in which our Identify and Onboard products can support you in accurately verifying your customer identities and improving your customer onboarding experience, contact hello@vaiie.com.

This article was first featured in the Jersey Evening Post September 2023 Finance Review which can be found online here.