Banks prepare for radical transformation of the regulatory landscape

logo-cropped-11The future of banking might move towards third-party technologies that would leverage a bank’s large client base, capital position, trust and brand name. This may be the basis for developing new third-party business models or allowing for clients to easily conduct business with one another.

Source: The Banker

Regulatory pressure

Regulatory pressures following the global financial crisis and anti-money laundering (AML) legislation have forced banks to rely on technology, in order to counter diminishing returns on capital. The highest regulation-related costs are building the compliance systems, establishing processes and higher capital requirements.

Collaborate to save

Banks are increasingly joining in collaboration efforts in order to cut costs. While collaboration with one another is an option, third-party providers are also bringing financial institutions together. Overbond is one of those initiatives where broker-dealers have a limited number of relationships, which is problematic in combination with falling liquidity levels. “The platform offers them the ability to form relationships with more market participants,” says Overbond CEO, Vuk Magdelinic.

Data importance

Growing regulatory measures have increased demand for the accompanying data, and in doing so forced financial institutions to become more data-centric. Most importantly, data will play a large party in restoring trust between banks and users, as more robust security measures have become available. Also, with many banks being the product of large mergers and acquisitions, need for amalgamating former data sets and processes has risen dramatically.

Demanding customers

Customer expectations have changed as a result of digitization and increases in convenience. Customer requirements related to this must be met in order to remain competitive. In addition, know your customer (KYC) is one of the most expensive areas for compliance, because of its competitive nature and poaching of talent.

Tech use

Banks are increasingly turning to technology to increase their competitiveness. Specifically, automation is a top priority within reporting, improvements in data quality, supporting the customer experience strengthening security measures as well as KYC. These areas are both labour intensive and create opportunities for human error, so implementing automation in these areas mitigates these risks.