Money20/20 USA took place last week in Las Vegas. Dubbed The Money Revolution, the massive event gave conference-goers a view into the proverbial ‘crystal ball’ of the future of consumer finance. The agenda covered trending topics like FinTech, Blockchain, alternative lending, payments, globalization and more; but the track that stood out most to us was Regulation & RegTech. The track's kickoff session The Emergence of RegTech and the Future of Regulatory Compliance highlighted the RegTech industry's innovative developments and their impact on the future.
PerformLine Founder and CEO Alex Baydin joined the panel alongside fellow regulatory innovators Jo Ann Barefoot of Barefoot Innovation Group, Nick Cook of the Financial Conduct Authority (FCA), Patrick Pinschmidt of Middlegame Ventures and Christopher Sidler of Promontory, an IBM Company.
As the regulatory climate continues to rapidly evolve, banks are looking more critically at areas where they’ve invested time, effort and headcount. Traditional innovation-averse banks are starting to look at technology (namely RegTech) and change of legacy processes as ways to compete and thrive. Nick Cook from the FCA even warned FI's, “don’t kid yourself that standing still is an option, the increasingly difficult regulatory environment is moving fast and you need to do something.”
Is that ‘something’ RegTech? It very well may be. However in order for RegTech to take off, both RegTechs and banks need to communicate better. According to Nick Cook, whose organization (the FCA) created the world’s first regulatory sandbox for regulators, cautioned, “the supply side needs to understand the challenges, to be honest about capabilities, to have the capital to finance it and there needs to be some scale.”
Hearing him loud and clear, Alex Baydin spoke on behalf of the RegTechs, stating that there needs to be more collaboration from banks, regulators and the tech companies themselves. Baydin spoke from a unique perspective, being a self-funded RegTech that has grown to one of the largest US-based RegTechs both in revenue and now working with a client roster that includes the worlds largest credit card issuer, mortgage issuer, bank and ridesharing company.
Baydin’s message to FI's was born from his own experience. “If you support innovation, keep in mind that you represent a customer segment that is one of the hardest segments for early stage to crack,” he states. “Long sales cycles, multiple stakeholders, InfoSec requirements, hundred-page MSA’s... so to the extent that you can, help the RegTechs navigate that process. Talk to them about your pain points and help them identify use cases. If we can’t do this, you may see some early stage RegTechs fail and some growth-stage RegTechs won’t be able to scale.”
The Emergence of RegTech wasn't the only session we sat in on. We heard from even more insightful speakers in other sessions...
"Regulation can be the secret sauce to innovation. If you run a bank and are worried about Big Tech taking your customers, and you should be, know that the one area Big Tech wants no part of is regulation. So if you learn to use compliance as an advantage, Big Tech will need you." - Derek White, BBVA
"Regulators are behind in harnessing data - it's in the best interest of the regulators to use technology to sift through data, as it's impossible for humans to sift through it all." - Thomas Curry, Former OCC
"Like the FCA's approach with the GFIN by inviting other regulators in a cross border collaboration, it would be a meaningful step for several states to come together in a partnership like this." - Paul Watkins, CFPB
Featured Image Taken by Matthew Van Buskirk, Co-Founder and Co-CEO of Hummingbird RegTech