The 76 recommendations of the Royal Commission into Banking this week point the finger not just at the banking industry, but at the regulators who failed in their vigilance and enforcement.
In some cases, the failures of enforcement were as a result not of a lack of will or energy but because of inadequate detection and information.
In some cases, breaches of regulations were picked up so late as to be meaningless and in other cases, they were not picked up at all until evidence was presented at the Royal Commission.
Regtech Has a Purpose
As the chairman of the Australian Securities and Investments Commission, James Shipton, has been saying for a while, one immediate way to improve regulation and compliance is through the adoption of regtech solutions, both for regulators and regulated entities.
The RegTech Association of Australia (RTA) was only formed in mid-2018 but has been quick to get on the front foot to point out the role it can play in improving the performance of the financial industry, and in rebuilding some of the trust which has been lost between consumers and providers.
In technology terms, Australia has developed as something of a global leader in the regtech industry but so far there has been a lot of talk and not much action. That is expected to change in the aftermath of the Royal Commission, with the Government committed to acting on each one of the 76 recommendations.
“The emphasis on simplifying the law and focussing on the intent will aid regtech innovation across the board, which is crucial since throwing more staff at compliance won’t deliver better outcomes,” said Lisa Shutz, a director of the RTA and the chief executive of digital identity startup Verifier.
“Accelerating the adoption of regtech requires corporates to fast track pilots, and the RTA is focussed on Time to Value. What is getting in the way right now is the slow buying process. It can take two years from first conversations to the deployment of regtech solutions.”
Becoming Regtech Savvy
Julian Fenwick, the RTA chairman and the chief executive of GRC Solutions, also seized on the point about drawn out buying, describing it as the “biggest roadblock.”
“Compliance teams need to get comfortable buying technology and IT and procurement needs to get regtech savvy,” said Fenwick.
“Since there is a global shortage of compliance professionals, and their backgrounds tend not to be technology, this is a human problem that is going to challenge the industry as it implements the Royal Commission recommendations.”
Fenwick said that some of the recommendations have ready-made, off-the-shelf regtech solutions ready to go. The insurance and retirement pensions sectors, for example, have the opportunity to implement Banking Executive Accountability Regime (BEAR) using the latest automation and not start off down the spreadsheet path.
“Where the Commission recommends new compliance, there are significant opportunities for corporates to share the cost and fast trade adoption, as long as data standards are in the mix,” he says.
“Staff remuneration changes and annual front-line remuneration reviews are going to challenge both regulators and regulated entities, and behind the scenes, some seriously heavy lifting on data is needed.”
New Regulatory Landscape
Already, the financial industry is factoring in how it can move on after the Royal Commission and use its challenge as an opportunity.
All this means that Australia could become a significant center for regtech in the short term, with opportunities for local businesses and proven international solutions.
Harold Lucero, another RTA board member, pointed to the opportunity to improve “the right flow of information” to deliver top quality compliance outcomes.
The challenge for the industry now is to harness the talent and the technology innovation necessary to enable key areas of change, for which there is now an industrywide mandate.