Jarred McGinnis, UK managing director of Ontotext, looks beyond the hype to see what’s really behind the finance world’s latest technology trend
The world of technology is awash with trends, buzzwords that rise and fall in the blink of an eye. Regtech, a portmanteau of ‘regulation’ and ‘technology’, is currently one of tech’s hottest sectors, and has been heralded by some as the saviour of financial services.
The problem regtech solves is simple enough to understand: financial regulation is becoming increasingly complex and difficult to both comply with and enforce. This issue is compounded by the inherent unpredictability in financial regulation, subject as it is to the decisions of politicians guided by public opinion.
These problems create challenges for businesses not just around understanding and acting on new legislation in a timely manner, but even simply understanding the legislation and understanding and ‘translating’ it into their own internal processes. If financial services companies could find a way to solve these issues they stand to gain a great deal through minimising their risk exposure and maximising potential revenue opportunities.
Using technology to ease this burden is nothing new: technology has been used at various points in the regulatory enforcement process for decades. What is new is both the quantity of data being produced by financial firms, the amount of data required by regulators, and the analytical capabilities available for processing of this data to provide valuable and actionable insight. Together, these developments represent a significant opportunity for innovation in the financial regulation space, so much so that the Financial Conduct Authority (FCA) issued a call for input supporting the development and adoption of regtech in November 2015.
What can regtech actually do?
The FCA breaks down the potential solutions regtech offers into four areas:
- Creating more efficient ways of sharing information for reporting requirements
- Closing the gap between the intention of regulation and the interpretation of that regulation within firms
- Assisting firms in managing, exploiting and analysing their existing data sets
- Allowing regulation and compliance processes to be delivered in a fundamentally different way
What is clear here is that at the moment regtech holds a lot of promise for different people in different sectors. As a result, it’s important that those interested in regtech have a firm grasp of the different technologies at play.
The technologies behind regtech
One technology that has been enjoying its fair share of hype this year is the blockchain, which could hold huge promise for the future of regulation.
Large banking organisations are pouring money into blockchain research: at the start of the year 11 top investment banks used blockchain to do mock trades with each other, signalling a big step towards the technology being adopted into mainstream finance. And Accenture recently made headlines by announcing it was researching ways to make the blockchain editable, enabling the technology to comply with regulation and provide additional ‘safety’ features.
In addition to speeding up transactions, using distributed ledger technology could also help reduce compliance overhead. If transactions and other financial activity between institutions were recorded in such distributed ledgers, this would allow for the implementation of regulation in ‘fundamentally different ways’, as the FCA puts it.
Fraud investigation is a particularly challenging area of regulation technology. This is primarily due to the complexity of problems posed by even simple scenarios: activities such as insurance fraud involve multiple actors with complicated interrelationships and asymmetries of information: until very recently this kind of advanced modelling was beyond the pale for most computing systems.
It’s about the semantics
Technologies such as blockchain and advanced interrelationship modelling have a lot of potential to fundamentally change how the banking system is run, but such changes are decades away. Meanwhile, businesses today are still struggling with the same regulatory challenges. If we’re to look at practical regtech for the here and now, it’s worth paying attention to the detail. Fundamentally regulation technology brings together two worlds of information: publicly available laws and regulations; and internal policies, procedures and processes.
The challenge is ensuring that public laws and internal company policy are compatible, or ‘speaking the same language’ – this would allow for business leaders and public institutions can understand each other’s priorities effectively and efficiently.
For example, when something changes in the law or regulation financial institutions need to demonstrate that they are in compliance with all of the constraints. This often involves a lengthy process of translating bespoke internal processes into the language and structures of the regulation governing those processes.
New technologies, such as semantics and machine learning, enable computer systems to identify knowledge and concepts across both of these realms – public law and internal company policy – and relate them to each other.
A form of database technology called ‘graph databases’ is now at a level of maturity that they can be used in these scenarios. Rather than modelling data as a spreadsheet of rows and columns, graph databases model data as a ‘web’ of information, making it easier for a computer system to understand an environment rich in complex and overlapping ‘many-to-many’ relationships inherent in domains such as financial regulation.
Semantic technology and natural language processing can make these graph databases more potent. At a simple level, these technologies enable machines to have an understanding of the keywords and relationships within a body of text. Complex written content becomes indexable and mappable to computers, enabling them to take a more active role in managing information.
Giving computers the ability to recognise, tag and link content in this way allows the pieces of information specified in financial regulations and policies to be represented in a uniform, ‘cross-compatible’ way across all applications and data governance catalogues within financial institutions.
Semantic technology interlinks these two allows for easy comprehension of the impact of the change so that the appropriate people in business leadership and operations of the institution are informed.
What’s next for regtech?
The key to regtech’s success will be its flexibility, and how easily these new technologies can integrate with existing systems. Banks are notoriously slow to innovate their IT systems from the ground up, preferring instead bolt-on technologies. This risk-averse attitude is understandable, however the result is that many financial services companies can be reliant on antiquated technology dating back to the 1960s. Deloitte estimates that in 2014 European banks spent €55 billion on IT, but of that only €9 billion was spent on new systems.
The key takeaway here is that ‘regtech’ is not a single technology, or even set of technologies. As with many buzzwords, it’s an umbrella term for a whole host of technologies, some of which are more advanced than others. So when you next see people talking about ‘regtech’, look at the underlying technologies with a more critical eye.
U.S. inauguration turns poet Amanda Gorman into best seller
WASHINGTON (Thomson Reuters Foundation) – The president’s poet woke up a superstar on Thursday, after a powerful reading at the U.S. inauguration catapulted 22-year-old Amanda Gorman to the top of Amazon’s best-seller list.
Hours after Gorman’s electric performance at the swearing-in of President Joe Biden and Vice President Kamala Harris, her two books – neither out yet – topped Amazon.com’s sales list.
“I AM ON THE FLOOR MY BOOKS ARE #1 & #2 ON AMAZON AFTER 1 DAY!” Gorman, a Los Angeles resident, wrote on Twitter.
Gorman’s debut poetry collection ‘The Hill We Climb’ won top spot in the online retail giant’s sale charts, closely followed by her upcoming ‘Change Sings: A Children’s Anthem’.
While poetry’s popularity is on the up, it remains a niche market and the overnight adulation clearly caught Gorman short.
“Thank you so much to everyone for supporting me and my words. As Yeats put it: ‘For words alone are certain good: Sing, then’.”
Gorman, the youngest poet in U.S. history to mark the transition of presidential power, offered a hopeful vision for a deeply divided country in Wednesday’s rendition.
“Being American is more than a pride we inherit. It’s the past we step into and how we repair it,” Gorman said on the steps of the U.S. Capitol two weeks after a mob laid siege and following a year of global protests for racial justice.
“We will not march back to what was. We move to what shall be, a country that is bruised, but whole. Benevolent, but bold. Fierce and free.”
The performance stirred instant acclaim, with praise from across the country and political spectrum, from the Republican-backing Lincoln Project to former President Barack Obama.
“Wasn’t @TheAmandaGorman’s poem just stunning? She’s promised to run for president in 2036 and I for one can’t wait,” tweeted former presidential candidate Hillary Clinton.
A graduate of Harvard University, Gorman says she overcame a speech impediment in her youth and became the first U.S. National Youth Poet Laureate in 2017.
She has now joined the ranks of august inaugural poets such as Robert Frost and Maya Angelou.
Her social media reach boomed, with her tens of thousands of followers ballooning into a Twitter fan base of a million-plus.
“I have never been prouder to see another young woman rise! Brava Brava, @TheAmandaGorman! Maya Angelou is cheering—and so am I,” tweeted TV host Oprah Winfrey.
Gorman’s books are both due out in September.
Third on Amazon’s best selling list was another picture book linked to politics and projecting hope: ‘Ambitious Girl’ by Vice-President Kamala Harris’ niece, Meena Harris.
(Reporting by Umberto Bacchi @UmbertoBacchi, Editing by Lyndsay Griffiths. Please credit the Thomson Reuters Foundation, the charitable arm of Thomson Reuters, that covers the lives of people around the world who struggle to live freely or fairly. Visit http://news.trust.org)
Why brands harnessing the power of digital are winning in this evolving business landscape
By Justin Pike, Founder and Chairman, MYPINPAD
Delivery of intuitive, secure, personalised, and frictionless user experiences has long been table stakes in digital commerce, well before the era of COVID-19. As businesses harness the revolutionary power of digital technologies, they have pursued large-scale change to adapt to evolving consumer preferences (some more successfully than others, but that’s a blog for another day). Digital transformation is a term we hear repeatedly, and it looks different for each organisation, but essentially, it’s about utilising technology and data to digitise, automate, innovate and improve processes and the customer experience across the entire business.
As I said, this was already well underway but then came 2020 and no industry escaped the disruption of the coronavirus outbreak, which has had an indelible impact on businesses performance, operations, and revenue. Regardless of whether the impact of COVID has been very positive or very challenging, it has forced organisations globally to re-evaluate and re-orient strategies to adapt.
As lockdowns and pandemic-related restrictions continue to change daily life, this raises the question of how we can balance a dramatic shift to digital and the benefits it brings, while ensuring business continuity and innovation both during and post-COVID, and protecting everyone against fraud?
Digital is an essential survival tool, and even more so in a COVID world
No one could have predicted the dramatic digital pivot that has taken place over this year. Indeed, within weeks of the COVID outbreak cash usage in the UK dropped by around 50%. Digital solutions including delivery applications, contactless payments, mobile commerce, online and mobile banking have become essential components of a touchless customer experience in the era of social distancing. It’s no longer just about an enhanced and superior customer experience, it’s also about health, safety and survival.
In store, businesses have benefited from contactless payments enabling faster throughput and reduced need for consumers to touch payment terminals (therefore requiring greater cleaning, which degrades the hardware much faster). Mastercard reported a 40% increase in contactless payments – including tap-to-pay and mobile pay – during the first quarter of the year as the global pandemic worsened. Digital has also become an essential sales channel for many B2C brands. Where brick and mortar stores have been required to close, digital commerce enables continuity of customer relationships and revenue. This channel also provides brands with rich customer data, which can be used to enhance and personalise the customer experience and typically results in greater levels of engagement and uplifts in revenue.
Industry forecasts estimate that worldwide spending on the technologies and services enabling digital transformation will reach GBP 1.8 trillion in 2023 – a clear indication that the process represents a long-term investment and a global commitment to digital-first strategy. The key point here is that digital brings significant benefits, and regardless of COVID, is here to stay.
The challenges that rapid digital transformation brings to businesses
Regardless of whether businesses are operating in developed or less-developed economies, these times of crisis have levelled the playing field in the sense that all businesses are facing similar issues. Access to products and supplies, maintaining customer relationships, accelerating sales for some and declining sales for others, health and hygiene are just a few of the unique challenges brought about by COVID.
Many businesses in physical environments have had to swiftly implement changes to significantly reduce safety risks for staff and customers, such as contactless payments, mobile ordering and delivery options. But with these changes come a host of other benefits of digitisation, such as faster transactions, and reduced human error at the point-of-sale.
The reliance on technology, however, can also expose organisations and consumers to certain vulnerabilities. In particular, the risks of fraud and cybercrime have dramatically increased since the onset of the pandemic as scammers have taken advantage of digital technologies to target both businesses and individuals.
As a McKinsey report illustrates, new levels of sophistication in the activities of fraudsters have placed more pressure on companies that have been previously slow to go digital, bringing “into sharp relief how vulnerable companies really are”, and damaging the financial health of small and large businesses. In fact, the Bottomline 2020 Business Payments Barometer reveals that only one in 10 small businesses across the UK report recovering more than 50% of losses due to fraud.
But take these stats with a grain of salt. While it is important to be aware of the risks and challenges this new business landscape brings, it’s equally as important to have a lens firmly across your own business, industry and audience, and to identify the changes you can make internally to mitigate risk as well as improve your customer experience. Where can you make some quick wins? Do you have the right skillsets internally to achieve what you need to achieve? What technology is out there that will enable your business goals? There are tech companies like MYPINPAD that are making huge strides in software development, which will transform businesses globally.
A digital world post-COVID
Almost a year in, the line between business success and failure remains fragile. However, an ongoing transition towards greater digitisation will be the difference between survival and the alternative.
There is a wide range of initiatives businesses can implement to weather this storm. If we look at the space MYPINPAD operates within, secure digital consumer authentication is crucial to the ongoing success and security of not only financial products but also identification and verification across a range of different industry verticals. Shifting the authentication of consumers securely onto mobile devices enables businesses to completely reshape their customer experiences. By bringing together a more seamless, frictionless customer experience, accessibility, privacy, security and access to consumer data, businesses are able to drive digital transformation across day-to-day activities.
Against this backdrop, software with stronger security standards continue to play an ever more vital role in supporting society, protecting consumers and businesses from the increase in risks that rapid digitisation brings. Already, merchants can deploy PIN on Mobile technology from companies like MYPINPAD, onto their smart devices to speed up the digitisation process many are now tackling.
Essentially, opening up universal payments and authentication methods that feel familiar, for both online and face-to-face transactions, will be key to opening up a world of possibilities when it comes to redefining how businesses engage with consumers.
Brexit responsible for food supply problems in Northern Ireland, Ireland says
LONDON (Reuters) – Food supply problems in Northern Ireland are due to Brexit because there are now a certain amount of checks on goods going between Britain and Northern Ireland, Irish Foreign Minister Simon Coveney said.
British ministers have sought to play down the disruption of Brexit in recent days.
“The supermarket shelves were full before Christmas and there are some issues now in terms of supply chains and so that’s clearly a Brexit issue,” Coveney told ITV.
The Northern Irish protocol means there are “a certain amount of checks on goods coming from GB into Northern Ireland and that involves some disruption,” he said.
(Reporting by Guy Faulconbridge; Editing by Tom Hogue)
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