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Government-Business Collaboration Key to Drive Regtech Ecosystem in Asia

An interview with

The first part of this interview focused on costs of benefits of compliance, various costs related to non-compliance—in the form of fines, penalties and reputational damage, for example—and emerging regtech trends across Asia. In this second part, Subas Roy, Partner, Digital Risk and Compliance at Oliver Wyman and Chairman of the International RegTech Association, speaks to BRINK Asia about the evolution of the regtech landscape in Asia, the nature of regtech partnerships and collaborations and the priorities in this space for both businesses as well as the government and the regulators.

BRINK Asia: What kind of financial institutions are leading the way in adopting regtech partnerships?

Subas Roy: I think it’s tricky to define because you see a different plethora of institutions. Banks have had an edge because a few of them did start investing early and therefore, it actually made sense for them to look into regtech and fintech frameworks. In the European scenario and in the large Asian banks, they have been investing and building their portfolio on some of these advanced analytics, artificial neural network-like platforms in the last two to three years. We are seeing activities in this area in terms of good investments being made on the financial crime and anti-money laundering side, on digital identity and also on web-tech platforms. What is important here is to recognize that Asia represents more than 60 percent of the world’s 7.5 billion population; this is the world’s largest consumers’ market and will be so for our lifetime and beyond. The untapped opportunities that we have in this continent in terms of digital financial services is second to none, and as a matter of fact, the best and the brightest regtech solutions of the future will be those that are successful in Asia, particularly in key economies such as China, India, Australia, Indonesia, Singapore, Malaysia and Hong Kong.   

BRINK Asia: How do you see the regtech ecosystem evolving in Asia?

Mr. Roy: This is where the opportunity lies, and this is where even I have the responsibility to ensure that the ecosystem and the collaborative framework’s objective are sustained. I think two important points are applicable to the Asia-Pacific region. First, the role of the regulatory bodies is fundamental. I see some of the large economies such as India, China, Indonesia and Australia—that is, countries with predominantly large financial services—and I think the regulators have got a huge role to play here. Regulators will also have to foster innovation to bring different parts of the market together—not only their regulated clients, but also universities, academia, the researchers, technology companies and the regtech firms—and jointly innovate on common issues. The issues could include financial inclusion, digital identity, financial crime and market conduct.

There is a huge opportunity for regulators and innovators to come together and create industries and platforms where they can come and discuss and innovate together. The Monetary Authority of Singapore (MAS), for instance, has both regulated and invested in several spheres to manage the market and encourage innovation. They have partnered and created sandboxes as well as platforms.

I also think changing the ways of working and culture is important. Asian banks don’t feel they need to learn so much because of superior product knowledge. However, although this approach was successful until now, digital is fundamentally different; it requires collaboration. It is about one idea that works and then expanding that across the region—digital means you need to integrate and collaborate—people need to start collaborating and sharing ideas. Culturally, digital is perhaps difficult, so those collaborative frameworks need to be created and fostered further, and the regulators have an important role to play in this regard.

BRINK Asia: In your view, what should companies in the region prioritize in the regtech space?

Mr. Roy: For financial companies starting out on this journey, there are lots of opportunities —payments, international money transfers, real-time transactions—we see a lot of innovation here. It is a similar case in traditional banking through blockchain; the opportunities are huge, but they need to respond to customer needs and they are responding well. You’ll see a lot of innovation happening in the wealth and asset management sector as well.

We need to showcase that people in the Asia-Pacific region actually trust banks and digital money. The opportunities here are vast and far-reaching.

In terms of starting the regulatory journey, the first requirement is that because of wide-scale digitization, it is important that if you are starting new, your products are customer-centric. Only create services that customers are going to buy and use. Second, compliance must correspond with customer journeys. If you are new, do not adopt traditional methods of controls and reporting. Risk by design and compliance by design are important. Third, fundamentally change the systems that have been implemented before. If you are talking about complying with financial crime regulations, checks and balances need to be embedded in processes so that the information can be obtained in real time. You need to ensure you have faster, better mechanisms to perform these checks and make decisions.

BRINK Asia: In your view, what should the priorities be for governments in the region, in the regtech space?

Mr. Roy: Priorities for the governments include: 1) Faster digital innovation into financial services, meaning faster digital innovation and fostering new products and solutions; 2) Glue yourself with the global community. What has happened in those regions? Have they started early, failed and started again? In Asia, we can learn from those mistakes and ensure that these are not repeated here; 3) Create collaborative frameworks wherein regtech and fintech firms can come together from the beginning. For example, if a new fintech is there, why can’t you ensure that regtech works with them to make sure that everything is compliant for the newer financial products and services, and finally; 4) Workforce of the future, providing people with new talent and techniques and understanding how to deploy the new technologies as well as how to interpret the results.

Effectively, have a set of Key Risk Indicators (KRIs) and Key Compliance Indicators (KCIs) defined to ensure that those link on customer journeys and business processes in an integrated risk and controlled digital platform. This is because if you are new today, you should not adopt traditional ways of risk assessment.

BRINK Asia: Are we seeing collaboration in this space between governments, service providers and businesses?

Mr. Roy: Keeping Singapore, Hong Kong and Australia in mind, I think we have had a great hype and a lot of good positive noise in these markets and there is an intention to do something. However, there is no positive outcome yet. Do you have a process where the regulators themselves are working with an identified number of banks that are compliant? You are witness to the happenings in the U.S., Germany and Switzerland. What we are now seeing are individualistic efforts here—work done by MAS, by HKMA—but we are not doing something established by everyone. In terms of where Asia is, it is very important that a cross-border network is created at an Asia- or ASEAN- or SAARC-level. Banks, regulators and innovators need to work together, but who is providing that framework? Do we not have the opportunity? Actually, we do and we need a collaborative regulatory framework among the countries for this to become successful.

Coming to India, China, the Philippines, Vietnam and Indonesia, there is significant opportunity offered. India has done a lot of work in terms of digital and financial inclusion but data security remains a huge issue. For the wider Asia-Pacific region, it is a huge opportunity. One of the big issues why countries cannot embrace financial inclusion is due to financial crime and lack of trust. Because of the tradition and history of money laundering that we have had in Asia, we need to respond to traditional cultural mindsets. We need to showcase that people are actually trusting banks and starting to use digital money and digital experiences. Given the size of these markets, the opportunities here are vast and far-reaching.

The first part of the interview can be read here.

Subas Roy

Partner, Digital Technology & Operations and Finance & Risk Practice at Oliver Wyman

Subas Roy is a partner in Oliver Wyman’s digital technology & operations and finance & risk practices. He has over twenty years of strategic digital consulting experience including advanced analytics, machine learning, and automation tools. Subas is also the non-executive chairman of the International RegTech Association.

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