Compliance Issues – Tech Pain

March 20, 2019
Read Time: 3 minutes

#RegTech #Compliance #Strategy

One of the best things about 2019 is the freedom of choice we have as consumers or business professionals over what technology we want to use to accelerate our personal and business development. There are an endless number of ways to connect with people, implement a sales strategy or automate a compliance strategy. But that is exactly where one of the biggest problems of 2019 can also be found.

With the myriad of choices comes new regulation that is designed to protect consumers and institutions alike from the heightened risk of fraud that arises from these new technologies. It’s often argued one way or the other that innovation drives regulation and vice-versa. In the UK we have one of the most innovative FinTech markets in the world, with some amazing challenger banks appearing over the last 5 years as well as payment service providers that are pushing businesses to new heights. It’s a great time to be in the financial industry. With the rise in FinTechs there followed a rise in RegTechs – Sphonic can count itself one of those.

In the case of London, I’d argue that innovation has driven regulation. This makes thinking about the future very exciting with new technologies on the horizon that could completely transform the consumer payment experience as well as the fraud prevention effort. However, with great innovation comes great headaches for compliance departments. How on earth do you stay on top of all of the new innovation which seemingly updates on a yearly basis? As if that wasn’t enough, how do you then make sure you are in line with the latest regulations, which also seem to update on an annual basis nowadays (take the 4th, 5th and 6th AML Directives as an example).

When Andy Lee, Sphonic’s Founder and CEO, decided to set-up Sphonic he was driven by the frustrations he had felt as a fraud manager in the dawn of the innovation era. In order to be competitive in a fast-growing market it was necessary to pursue the latest innovative technology for your compliance processes. However, while it is great to have so much choice, it is impossible to keep pace with the speed of innovation as it is now while trying to plan and implement technology strategies that will inevitably be out of date in a year’s time.

Another challenge that is more relevant today than ever is the speed of regulatory changes that often require new technologies to be considered and implemented in order to stay compliant. The latest PSD2 regulations have brought in the era of open banking which requires compliance from both banks and service providers but also opens up new innovative services for consumers that could really drive innovation in the FinTech industry for many years to come.

On top of the pressure to keep up to date with the latest innovations and regulations, there is an internal pressure on compliance teams to act in a way that benefits all parts of the business – especially those that are revenue generating. If a compliance process is slowing down a customer on-baording process, then a sales team could miss out on their monthly target. We have spoken to a number of clients where this is the case and the best solution is not always clear as the compromises can be significant.

The founding team at Sphonic decided that it would like to address this problem head on. Having all worked in fraud teams for more than 20 years, the frustrations were felt first hand by the entire team. Our flagship product, Workflow Manager, was designed to be a technical gateway to every innovative RegTech solution with an API to connect to. Today we are connected to over 85 different RegTech services and we are pushing that number up each year as new innovations appear in the market.

As well as providing a technical gateway to multiple API services with our single API, the team are all subject matter experts and well versed in the latest regulations, often getting involved in shaping the next version of a directive. When we build a workflow for a client, we are considering the latest innovations, their policies and the direction in which applicable regulations are moving in their industry. This allows our clients to keep a pace with innovation and regulations, as we facilitate the changing of connected services in their workflow via a single ‘drag-and-drop’ procedure that is only possible due to the work we have done to connect to these 85+ services.

Through a detailed approach to workflow design in collaboration with our clients we have formed partnerships that stick and we are involved in valuable two way learning processes where we learn best practices across our client base and are able to relay those on to new clients that are looking for some direction from us as well.

If you are interested in understanding more about our Workflow design, please get in touch or take a look at our Workflow Manager page on our website.