Banking on a digital future

An ever-increasing challenge: How can banks manage compliance in a digital world?

10 Jan, 2018
5 Min Read Dan Ward

An ever-increasing challenge: How can banks manage compliance in a digital world?


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It’s no secret that banks and financial institutions are having a tougher time staying compliant these days. In the wake of tighter regulations following the global financial crisis, technologies such as cloud and the internet of things (and associated security concerns) have further complicated the compliance landscape. The problem is that staying compliant isn’t cheap. Regulatory costs in the financial services industry are expected to more than double over the next five years in Europe. It’s a similar story closer to home.

At the same time, the cost of non-compliance is on the rise. Worldwide, banks have paid $321 billion in fines since 2008 for regulatory failings. Local banks have avoided the worst fines. But they also spend significantly less on compliance than their overseas counterparts. So what can be done to ensure Australian banks stay compliant in a digital world?

Hiring more staff is no longer the answer

After the global financial crisis, banks responded to tighter regulatory requirements by hiring more compliance staff. But with rapidly evolving, technology-led changes to business banking models, this may not be the best way forward. As HSBC CEO Stuart Gulliver told media earlier this year, technology is key to managing compliance not employees. “The banking industry is likely to employ less people.. As more technology comes in, and more robotics are used, the efficiency will go up and the number of people employed in the industry will go down,” he said.

At Royal Bank of Scotland Group, for example, up to 2000 jobs will be cut after the process for checking customers for suspicious traits is digitised. This is just one case of a bank using technologies to maintain profitability and streamline compliance models.

Apply lean agile principles to streamline compliance projects

Once the domain of IT companies, lean agile principles can also help banks to stand up projects quickly and cost-effectively. In the fast-changing world of compliance, lean agile principles give banks the tools and methodology to respond to changing regulatory requirements.

RXP, for example, has developed a product called Quick Start, which is built on Lean-Agile principles. Quick Start accelerates portfolio, program, project and service operations planning in a collaborative manner, which means that it’s faster and cheaper to set up new projects compared to more traditional, less agile methods. RXP has facilitated over 80 Quick Start sessions over the past two years, many of these in highly regulated organisations such as Telstra Wholesale.

Use technology to your advantage

There’s no getting around the fact that compliance is a necessary part of operating in the financial services industry. However, there are plenty of opportunities to harness technology to streamline and improve compliance while realising significant operational efficiencies. These include:

  • Standardising and automating compliance processes related to Know Your Customer (KYC) and fraud detection
  • Using data mining to identify patterns in large data sets, making it easier to monitor transactions
  • Leveraging machine learning to enhance scoring algorithms so that rating customer risk is faster and more accurate
  • Integrating artificial intelligence into existing processes, such as linking data between systems
  • Verifying customer identities with biometrics to reduce fraudulent applications and provide a streamlined customer experience

Forward-thinking banks worldwide are already looking to technologies such as these to effectively balance compliance and profitability.

Where to from here?

According to Thomson Reuters Regulatory Intelligence Expert Bora Yagiz, “One of the key challenges for financial institutions in coping with the increasing regulatory requirements of the post-Dodd-Frank era has been providing timely, accurate, and precise reporting supported by quality, structured data and risk analytics.”

The good news is that armed with the right expertise and methodologies such as those offered by RXP – banks that harness the latest technologies can overcome many of these hurdles with ease. To find out more about how technology is shaking up banking and financial services, download our latest white paper today:

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