Welcome to part four of our Q&A mini-series with some of the experts we interviewed in our recent Future of Banking Report.
BEN RICHMOND, FOUNDER AND CHIEF EXECUTIVE OFFICER, CUBE
Can you tell us about CUBE and how you are working with banks?
BR: We monitor what is changing in the world of regulation, whatever that might be at any level across the globe. The key thing about CUBE is that we focus on automating enterprise-scale regulatory change management processes, doing this from a global perspective across all of the regulatory universe. Once we identify a regulatory change, there are two things that enable us to then assess specifically how it impacts a bank’s compliance. One is that we understand the characteristics of each individual bank, so we understand the lines of business they pursue, the jurisdictions they operate in, and the products they sell. And then we connect that to their governance framework, which is their policies, procedures and controls. So if you have a regulatory event that occurs or a change that happens somewhere across the globe, CUBE would detect that but also determine where, for each individual bank, it would impact them using our AI capabilities. CUBE would flag a change up and say you need to review your control and make sure it’s comprehensive enough to meet obligations relating to that particular change. If a new requirement came through and our AI couldn’t detect a policy, procedure or control that it could match to, then we also identify that as a gap. We would alert the bank, notify them that these new regulatory requirements have been introduced and they don’t have comprehensive coverage at the moment, so they need to establish new controls or remediate existing controls.
How does your platform compare to the old ways of managing compliance?
BR: The way banks generally manage regulatory change today is they will have both internal and external people monitoring websites and RSS feeds and third-party information providers to try and spot a change, which can often be out of date. When they identify a change they will then run various manual processes to understand where it impacts them, and what the priority is. That all takes time and effort and money. Then when they’ve worked all of that out, they have to make sure they have the right policies, procedures and controls in place and, if not, work out how to remediate. Traditional methods of managing regulatory change take a bank weeks and weeks, and cost them tens of thousands of pounds to carry out in terms of time and internal and external resource costs, just to implement one change. We can do all of that in near real time at a fraction of the cost and take them straight to the point they need to focus on, which is ensuring they have appropriate controls in place to deal with this change.
How do banks integrate your technology with their existing IT systems?
BR: We have a master regulatory database that we machine learn from and do our processing around, and then each customer has their own entity within our cloud, which they connect their infrastructure to through our API. That’s the only way to get them there—if a bank tries to implement this internally it would take at least a year. Regtech is a whole new opportunity for banks. For compliance, legacy is normally about email and spreadsheets and manual processes, so it’s all about managing the change rather than taking out big legacy systems.
How important is regtech for banks?
BR: If you take it that regulatory requirements are going to continue at the velocity they are currently, then it’s going to be unsustainable for banks to continue managing regulatory change manually. Their margins are squeezed, they are under pressure to make money, and yet their compliance spend continues to rise. The headcount and expenditure around compliance is out of control. They have to look at new ways of managing this.
How do you see the regtech industry developing over the next few years?
BR: It will be a long journey. Over the next 10 years there will be huge transformation, and regulators will need to come on that journey as well. The whole way in which banks think about how they regulate themselves and how the regulators think about how they monitor and supervise, all of that is in for a chasm of change. AI is a buzz word but fundamentally AI is about how you can manage and learn from data, and there is no better use case than regulation. You’ll see platforms like ours become common place to help deal with this. Today we’re processing regulatory changes in 60 languages and 180 countries, and we’re just touching the tip of the iceberg as to what we are actually able to do for our customers. People talk about regtech being a $100 billion industry, and the reality is that all of that spend is there—the question is who can crack the really tough nut to help unlock that for customers, by getting them to see the benefit. We’re starting to see more interest at board level now, and that’s been a real step change in the past year. Senior buy-in is crucial because if you haven’t got somebody sitting at the top of the bank giving a mandate to invest in this technology, it’s not going to happen.
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