Keep your friends close, and compliance closer

Compliance should be a help not a hindrance.

Compliance, eh?

It’s a good friend, but a bad enemy and where you stand in its eyes depends on your organization’s experience in the sector – with maybe surprising results.

Challenger institutions, which have been enjoying their agility, efficiency and superior technology adoption rates seem to have skipped a step too far as compliance fast becomes their greatest obstacle, as members of this year’s financial services conference, Sibos, hosted in Geneva, found out. Emerging banks challenging high-street brands, lenders and deposit banks will have to work with the same compliance facing their traditional rivals soon, stalling their agile differentiation and some wonder how they will cope in the eyes of the customer.

This is all down to trust in the system.

Customers, still in the shadow of the 2008 financial crisis last decade and becoming increasingly aware of data security, need to feel assured that their banks have everything under control, and are properly regulated. Data protection laws have come into force across many industries, and banks have witnessed rule after rule come into force around their customers – think Know Your Customer and AML.

Even if these wouldn’t necessarily prevent creativity or investment in new products or services, certain financial institutions would be forgiven if they felt compliance had produced far too much red tape.

But, wait. Regulation could actually be seen as an ally. Compliance should be proudly displayed to customers as an example of trust and proof of their dedication to putting the customer first. Compliance is not just an ally therefore, but a loyal friend, willing to defend a bank’s reputation – and has the bonus of acting as a handy speedbump for its competitors, the emerging institutions.

Furthermore, recent technology innovation actually makes it easier for banks to meet their compliance obligations. For example, e-banking produces a clear audit trail and should the use of distributed ledger turn mainstream, transaction chains will become even more robust, secure and reliable.

So rather than acting as a brake on innovation – as all enemies surely do - the adherence to compliance could actually accelerate business opportunities for banks.

This relationship however must be cultivated. For all the importance placed on technology, trust should still be a banks’ most treasured possession, and that can only be guaranteed through compliance. Sibos’ response to this involved chucking yet more technology at the problem (it’s worked before, to be honest) utilizing AI and Big Data to help reduce fraud in the market.

This conversation was one of the more delicate at Sibos. It requires a fuller understanding of the wider context, and an appreciation that compliance can promote new opportunities which far outshine any pauses on innovation certain circles believe it encourages.

Continue the conversation by exploring our Insights from Sibos whitepaper.