In late-2016, a new mobile service provider (MSP) sounded the bugle of its arrival in a hyper-competitive telecom services market by onboarding nearly 50 million 4G subscribers in less than three months of its launch. How did a new player rapidly gain share in a market characterized by a time-consuming and expensive customer onboarding cycle that includes a paper-based Know Your Customer (KYC) process.
The accelerated customer acquisition was the result of a landmark decision by the local telecom regulatory body that allowed the use of biometric authentication for issuing new mobile connections. This enabled businesses to digitally perform KYC verification using a customer’s existing biometric-based ID proof. However, instead of relying on biometrics as an alternate KYC mechanism, this new MSP made it the “primary” KYC requirement. With this, the company could drastically reduce KYC compliance time and costs, achieve a quick roll-out and gain an advantage over incumbent players. Smart use of regulatory technology (RegTech), indeed!
RegTech: More than just a compliance play
RegTech is the innovative application of emerging technologies such as biometrics, AI, blockchain, APIs and analytics, to help companies conform to evolving compliance requirements and stay ahead of competition in a digital marketplace. With the annual global volume of regulatory publications, changes and announcements set to rise across industries, the cost of compliance is also expected to increase significantly. Companies must, therefore, view RegTech as more than just a means to reduce their regulatory and compliance burden. Instead, they should explore innovative ways in which to use it for bringing down compliance costs and improving the quality and speed of the regulatory response process. In fact, as the above MSP example suggests, it’s time to think of RegTech as a strategic differentiator to:
Achieve faster time to market for innovative products and business models.
Proactively mitigate risks due to non-compliance.
Increase operational efficiencies.
Win more through an enhanced customer experience.
RegTech & GDPR: Embrace a customer-first approach, first.
In a hyperconnected economy, data is critical for the success of any business. With the impending introduction of General Data Protection Regulation (GDPR) from May 2018, data privacy will be critically evaluated in most large economies. GDPR is a set of new rules and legislation regarding the collection, storage and processing of personal data relating to individuals in the European Union. With the introduction of GDPR, the unfettered access to customer data by businesses may end and noncompliance could lead to huge fines. In such a scenario, how can technology help businesses make GDPR adoption more than just a compliance play, safeguard customer data and win their trust?
Picture this: A credit card company continues to send promotional e-mails on new products to a customer who has withdrawn consent to receiving them. For a GDPR-aware customer, this could be considered as a breach of trust and may result in the company losing customer trust and facing customer churn.
Companies preparing for GDPR compliance must, therefore, keep the customer at the center of their RegTech strategy to be more agile and innovative in adapting to regulatory changes. A customer-led RegTech approach to GDPR can include:
Adopting privacy-preserving analytics such as privacy-preserving linkages to obtain customer insights while still complying with GDPR.
Using micro-learning platforms to disseminate knowledge about GDPR internally and inculcate a data privacy-compliant customer service culture.
Leveraging artificial intelligence to help customer service agents better respond to customer queries about data privacy and business processes.
Including privacy compliance in software development methods and tools.
Investing in intelligence augmentation of key participants in the regulatory process (for example risk officers, fund managers and customer service agents).
The way ahead
The volume of new regulatory requirements that change frequently renders a manual or less automated approach to compliance time consuming, ineffective and unsustainable. Two promising trends in RegTech can help businesses achieve faster and more efficient adoption of regulations in the future:
Technology stacks. Technology stacks save businesses the need to build regulatory primitives from scratch for their products. Instead, they can rely on compliance-tested APIs from trusted providers. This facilitates rapid regulatory compliance and provides an interface with the larger regulatory ecosystem (payments, e-Sign, etc.) for developing innovative products. IndiaStack, for example, is a set of APIs that help governments, businesses and developers gain standardized API access to regulatory compliance primitives. Examples include biometric-KYC, e-Sign, secure document repository and payment interfaces.
Digital regulations. Regulators like the Financial Conduct Authority (FCA), UK, are increasingly digitalizing regulations. Digital regulations, encoded as machine-readable software logic, reduce the gap between regulatory intent, interpretation and action. Just like web services and APIs have transformed the way software is built, digital regulations offered through regulations as a platform (RaaP) have the potential to dramatically transform how compliance applications are built and used.
In our next blog, we will explore how platforms, digital regulations and AI can come together to create Smart Regulatory Advisors.