RegTech Innovation and Closing Gender Gap in Regulation And Policy Making

I had the pleasure of interviewing Dr. Sian Lewin who is currently Head of Client Delivery and Research at RegTech Associates and the Founder of the RegTech Women network.

Breana: Thank you so much for doing this with us! Can you tell us a story about what brought you to this specific career path?

Dr. Sian: It’s a pleasure! I think when we look retrospectively about how we end up in a certain place in our careers, it’s easy to make it seem like it was all planned out and carefully thought through. In fact, what brought me to this point has largely been the result of serendipity and saying ‘yes’ at several different junctures in my life. For example, 23 years ago when I was starting out on my career in financial services, I said yes to the opportunity to go and live in New York for a couple of years. Who wouldn’t?! Similarly, when I was working for a management consulting firm, I had a back injury which I had to take time off to recover from. When I returned to work, I was asked if I’d like to work on something called Basel 2, as the team was short of people. I jumped at the chance and realised the intellectual and practical challenges involved with financial regulation which has been mirrored by my years of experience in implementing regulatory change within financial organisations and the doctorate I gained from the London School of Economics which allowed me to explore regulatory change from a more academic perspective.

Breana: Can you share some of the most interesting use cases you have come across in the field of RegTech?

At RegTech Associates, we are in the fortunate position of meeting with many RegTech companies every year and therefore see at first hand the many companies that are building solutions to solve regulatory challenges. Of these, I think I would highlight three use cases in particular where I see RegTech helping to solve some of the thorniest problems faced by the financial industry. These problems are not necessarily specific to a type of regulation — such as fighting financial crime, preventing market abuse or complying with capital adequacy requirements. They are problems that span all regulatory domains and are challenging across the industry. Often, they also lay the ground for really unlocking the promise of innovative technologies.

The first use case is the problem of managing the continuous stream of regulatory policy changes — the well-known figures highlighted by Thomson Reuters in their Cost of Compliance report last year suggest that there are on average, over 200 regulatory alerts per day. For an internationally active financial firm, this is complex and challenging pertaining to a number of issues such as: what are the changes that impact that firm, how do they impact and who should then be responsible for managing those impacts? Dealing with this requires a single prioritised view of all the changes so resources can be allocated appropriately to ensure compliance with the new or changed rules and that this compliance can be evidenced to the supervisor’s satisfaction. There are some great RegTech products that are aiming to tackle this gargantuan task but it has not yet been wholly solved.

The second use case is around the management of data that is needed for regulatory compliance, whether this is for regulatory reporting or transaction monitoring or trade surveillance. It is stating the obvious to say that data is often fragmented, with no common understanding of the underlying meaning. Tracing data lineage — i.e how it is transformed or aggregated as it passes through the firm’s systems can be difficult and being clear about who has ownership of different data sets within the company is also problematic. Of course, much of this can be solved through improving data governance but there is some exciting application of technologies such as semantic modelling to arrive at a common data dictionary across an organisation so a shared vocabulary and understanding of each data item is achieved.

This recognition that common data models are the key to really unlocking the power of artificial intelligence (particularly natural language processing) is also occurring at an industry level, including initiatives such as ISDA’s Common Domain Model which is making use of techniques developed by RegTech firms.

Finally, I would highlight the power that RegTech has in turning well-managed data into insights and information that can not only help improve compliance but also reveal additional insights that can drive business growth and improve customer outcomes. An example of this is combining trade data with voice and communications data to identify suspicious trading patterns. The same types of data in retail banking could be used not only to monitor compliance but also gain insights into customer behaviour, to tailor products and services to customer needs.

Breana: RegTech is much more than just automating regulatory reporting. Can you share what are the other greater benefits you see industry can harness from RegTech?

Dr. Sian: I absolutely agree that RegTech is more than automating regulatory reporting — or applying digital technology to regulatory reporting, but there are significant benefits to be gained for both regulators and regulated firms from streamlining this process!

There are some obvious benefits to firms from adopting RegTech solutions — reducing costs, improving efficiency and reducing risks. However, I think we need to be more ambitious when discussing the benefits of RegTech because this will help to overcome some of the obstacles to adoption in the industry.

Firstly, we need to be clear that we are starting from a baseline where many (but not all) regulatory processes are managed using email, spreadsheets and a lot of governance committees. This takes up precious senior management time and attention, which could better be used to focus on the core business of the firm. Automating and streamlining regulatory compliance frees people up to focus on the important decisions, the areas where human judgement is required and helps to return the focus onto relationships with customers and clients.

From a regulator’s perspective, seeing a firm where regulatory compliance is deeply embedded in the technology infrastructure helps to evidence that the firm has prioritised compliance from an investment perspective and has designed regulation into every single process, system and control.

Breana: What are the most important factors Banks should consider when onboarding a RegTech Solution?

Dr. Sian: There is a huge cultural gap between large financial institutions and small, nimble RegTech companies. Ultimately, the success of onboarding a RegTech will require accommodations from the firms on both sides of the transaction. RegTechs must provide the same assurances with regards to IT and cybersecurity and their other policies to engender trust. On the bank side, there needs to be a recognition that an overlong procurement process can jeopardise the financial security of the smaller firm, and work to shorten and streamline this process whilst being appropriate in mitigating risks.

The most successful RegTech and bank relationships I’ve seen are where there is a true sense of partnership, a high degree of trust and honesty and clarity regarding the capabilities of the technology. Banks also need a willingness to learn and iterate and not expect a perfect solution immediately — this is the only way that innovative solutions will be successful in large organizations.

Breana: While there is a gender gap in Bank Boards, this gap is even more in the field of RegTech, Regulators, and Policymaking. Christine Lagarde and Janet Yellen have inspired many women in this field. What do you think will help address this gap?

Dr. Sian: This is something I feel very passionately about. With respect to the lack of gender diversity in regulation and policy-making, I think this reflects the gendered nature of the economics profession in general — you only have to read a university undergraduate economics syllabus to see the under-representation of female scholars in this discipline. There are brilliant female economists such as Ann Pettifor and Mariana Mazzacuto to name but two.

More broadly, there are actually many women working in RegTech — there are some amazing female founders of successful companies. However, there is not enough celebration and promotion of this talent, not only of those at CEO level but also those who are working as developers, in sales, in marketing, in product management, and as subject matter experts. This is why I have founded a RegTech Women network, which is launching in the UK on 27th February this year. The objective is to bring lots of talented women together, to provide a space for nurturing talent, furthering industry collaboration and educating the broader financial industry on the benefits of RegTech

Breana: Can you please give us your favorite “Life Lesson Quote”? Can you share how that was relevant to you in your life?

Dr. Sian: The quote that has stuck with me since my teenage years (which is a long time ago now) was by Henry David Thoreau:

“I went to the woods because I wished to live deliberately, to front only the essential facts of life, and see if I could not learn what it had to teach, and not, when I came to die, discover that I had not lived”

For me, this quote really resonates because we so often go through life on auto-pilot, without really connecting to that which really makes us feel alive. For me, this is being in nature or with people that I love, attending to the present moment and not worrying too much about the past of the future. I have found this to be especially important in painful or difficult situations because it is these moments that offer us deep learning and help us to grow. I believe we should make the most out of what we already have — whether this is our potential, or material resources or our knowledge and expertise — rather than always striving for more.

Breana: Some of the biggest names in Business, VC funding, Sports, and Entertainment read this column. Is there a person in the world, or in the US with whom you would love to have a private breakfast or lunch with, and why? He or she might just see this if we tag them 

Dr. Sian: This is a really difficult question as there are so many people I admire but I think right now, it would have to be the writer and academic, Brene Brown. She researches shame and vulnerability and has written recently about the need to heal many of the divisions in society, to break down the tribal barriers we have built up and to start really listening to other people.