We live in a digital world. More human interactions are happening online every day, connecting us remotely to new people, new places, new opportunities. It’s an exciting time, but one in which new risks and challenges also arise. In the age of the smartphones, access to financial services has grown at an unprecedented rate. No longer the preserve of the financially privileged, new technologies have emerged since the ‘08 financial crash to offer alternatives to the 40% of unbanked adults across the USA.
But how to protect them? As volumes of users skyrocket, both regulators and businesses have struggled to keep up with the increased demand. Heavier regulations have led to spiraling compliance costs for businesses and anxiety about who exactly is accessing these services has gotten worse, not better.
At Onfido, we believe that RegTech can bridge the gap between regulators and business while protecting the best interests of consumers. RegTech enables regulators to successfully implement and audit their compliance requirements and offers businesses a cost-effective way of meeting them. Most importantly, RegTech makes these services available to those who, until now, have been excluded from our economy.
That’s why we’re launching the RegTech Principles for Innovation. Here’s how we intend to build an inclusive Financial ecosystem that cares for the consumer and keeps businesses safe in the face of new risks.
Meeting regulatory requirements means a lot of manual work for businesses. Complex, hard to keep up with and even harder to bend businesses around, there’s often confusion surrounding what’s legally required of businesses. This makes transparency with customers and accountability to auditors a virtual impossibility.
RegTech translates those regulatory measures into interoperable API (Application Program Interface) code. With that code, businesses can automate their regulatory processes, easing the manual burden of monitoring and enabling them to confidently comply with the law.
Scalability is crucial in an environment defined by expanding markets and growing customer bases. But with increased volume comes increased risk and greater challenges for growing businesses. Finding a way to keep a handle on fraud without resorting to the onerous checks that alienate customers is a difficult balance to strike, and means financial services lose up to 40% of their customers before they’re even onboarded.
RegTech delivers intelligent, cost-effective solutions to help get that balance right. By automating regulatory processes, RegTech ensures user interfaces remain accessible and platforms secure, even as volumes swell.
According to Ericsson, 2.6 billion people around the globe now use smartphones. Soon, it will be 6 billion. While this explosion in mobile adoption promises near-universal access to financial services, with it comes the need to ensure that the right people are offered opportunity without the wrong ones slipping through the net.
RegTech empowers both users and businesses to make the most of the mobile economy. Remote access to services for users need no longer mean exposure to risk for businesses: RegTech makes it possible to bring users onto your platform with absolute confidence that they are who they say they are.
Despite the advent of new business models and technologies to offer greater access to financial services, 2 billion people worldwide remain un- or under-banked. Though the tides are turning, there are still too many economically vulnerable people who find themselves forced into unfair and expensive arrangements while financial services play catch-up.
RegTech facilitates the inclusion of these new consumers, enabling them to contribute to the economy whilst ensuring that they and the businesses they use are protected. With RegTech in place to ensure that risk is managed, businesses can open their doors to more users, truly granting access to the masses and promoting responsible innovation.
Regulation costs US businesses $1.9 trillion every year. With different requirements at national, state and local levels, the steadily increasing pressure is leaving businesses time and cash-poor. While we don’t believe ditching regulation altogether is the way forward, it’s clearly time to rethink the way it works.
RegTech streamlines compliance processes to reduce costs for businesses and demand accountability from diverse regulators. RegTech has enormous transformative potential – but that potential will only be recognised when we have a cohesive regulatory framework that’s built for a digital world.