Jason Boud - A Panorama of RegTech Trends and of the RegTech Market

Thank you. Good morning. Excuse me. Thank you. Good morning. Thanks to keeping a calling from Lauren CX P for the invitation this morning. My way of brief introduction. My background prior to that has really been working in technology technology within primarily financial institutions. A little bit outside of that as well. Over the last five years, I've been working a lot in the startup space.

I left working for a bank in 2013 and have been working really in the startup and scale up space, which allows me to have some experience in both large institutional financial services companies, but also in the really exciting and amazing world of the, of the startup space, especially around FinTech and rec tech. I really don't, I'm really a relative novice in regulation. My first experience in regulation was really around 2010. I was responsible for the implementation of the do Frank act credit Swiss.

And for me, that was the first time that the impact of regulations was really interesting to hear the last week, because for me, God, Frank, you know, the us regulation really impacted global banks in just about everywhere. They dealt with swaps processing. And for me, that was the start of seeing how regulations impact companies globally in the middle of 2016. Having had a background of technology and reg, I started looking at this reg tech thing and I didn't understand it, which is a bit odd.

So, and the reason I didn't understand it is cause I found that there was a lot of conversations taking place in the industry that were about technology solutions and know in the conversation were the people that have the problems and the people that have the problems. And not me, they're people that under regulatory obligation.

So I, I decided like any good entrepreneur to sort of try and fix this problem and thought, well, how difficult can it be? I'll just start running my own events and writing my own content. And I can tell you it's pretty difficult to run events, but it's a lot of fun. You get to meet a lot of amazing people. So I set up red tech associates at the beginning of end of 2016. And really we aim to ask questions like, what are the, what are the use cases who are the companies to watch? And therefore today I'm gonna speak to you about just really my experience of some of the red tech landscape.

And I'll try and start at the high level and dive in into a little bit of detail. And I'm also around the go as well. So if I go over time, please, please, and ask me a question. We built a community. Cause one of the things I wanted to do was, was drive the discussion from starting with the problem that the financial institutions are facing. And a lot of people ask me is Greg tech, just financial services? And the answer is no, it's not. But a lot of the conversation today has being driven in the financial services sector. Not surprisingly since what happened from 2007, 2008.

So we've built this community with the largest independent global community. I call it an independent global community because I'm not selling products to, to these organizations.

I'm, I'm, I'm building a marketplace, I'm building a community and I don't sell software products on the side of my business. We cover the market, the, the red tech providers you'll see later on it's, it's small compared to identity and access management. It's small compared to FinTech. We think there's about somewhere between 600 to a thousand sort of products and companies in the RegTech space, but it's growing pretty quickly. It's not like FinTech, where if you looked at the Boston control tower, there'd be 10 or 11 or 12,000 companies in the FinTech space.

RegTech are much smaller subset, but it's still quite interesting. We have financial institutions in our community. And then the third side of the marketplace is the enablers really lots and lots of really intelligent and smart people in this space. Working at regulators in law firms, professional services firms, associations. What we do for, for that, that community is drive conversations through events. Our events are completely turned onto their head to normal sort of vendor events, where we ask the regulated institutions to come and talk about the problem.

And we have people like BMP powers, Barclays, many more that host our events for us, and they bring senior people in the risk and compliance. And generally across the organization into the, into the conversation, it's been quite surprising to me that actually one of the main roles that have been missing from the red tech conversation, you actually been compliance over the last couple years. In my view with compliance teams in large financial institutions are, are really busy driving the car, little time to think about how to build the next generation of cars.

So, you know, we'll, I think we'll see that changing over the next year. We work on launching and working with red tech companies. So typically if you work, if you know anything about working in the startup space, it can take you up to three years to find a problem, develop your solution and, and, and do what is known as product fit to market. So to get you the right features for your product, that the marketplace wants to buy and to possibly find your own, your first buyer three years is a long time from starting the business to securing some first revenue.

So we try and accelerate that for people help launch red companies have launched we to help grow their customer new markets. And we do instructions along the way. So the rise of rec tech through 2016 and 17, we really saw a big rise in rec tech, a lot of hype, a lot of marketing, but equally some acquisitions, which are quite interesting. So last year, Thompson Reuters have been a big provider of, of governance, risk and compliance, known as GRC.

But last year, we started to see some new acquisitions in the marketplace, which sort of implies that red tech started to grow up as an example, NASDAQ, you know, market infrastructure company acquired a behavioral analytics company called cybernetics last year. So we're starting to see this rise of red techs growing up. It's becoming a bit more credible and it starts to become even more credible. When you see big companies waiting into the marketplace, make acquisitions, doing merger and acquisitions. So we were being asked last, last year, really by our clients and our community.

Some, some questions, what exactly is RegTech? How do you define it? What are the dominant technology trends?

Well, the answer blockchain, what's the question, you know, who are the rising stars? Who are the people that are, who are the great speakers? I think you have Charlie be, I'm really sorry to cause I think Charlie's a great, great speaker and a great, very knowledgeable person in what's happening in how technology changes, the changes, the landscape who, the economic buyers, red tech, you know, the compliance people are missing at the buying table as a red tech provider. Who should I go and talk to? Who should I go and have conversation with?

Sounds like a pretty simple question, but if you can't answer that running a startup, then you you're in a bit of, bit of trouble and people will always asking me, where do I go to find out more? How do I cut through the noise? You'll see later we have somewhere in a region of 124 financial crime companies in our landscape. So if you are sitting inside an organization with a financial require, a money laundering issue, or potential issue, and you need to find a solution from that, you gonna do an RF request for information, a request for proposal to all hundred 24 companies.

It's not really feasible. And the way technology moves you can't afford to spend a year or two years starting the market and surveying the market. And then how can, where can red tech be applied? How many companies are going to survive? How do you measure effectiveness? So what I mean by measuring effectiveness is a lot of people will claim an ROI on technology and technology costs to implement. But how do you really measure it? Can a company actually demonstrate ROI to you before you go on on and select their technology?

So finally we asked, we, we thought about the final question, which was why, you know, why don't we create premium resource in the marketplace to help answer these questions? So through the last year we, we did that and the results are free to, for people to view and use. And it's known as the rec tech directory. There's a few. So I put the URL up on the screen. I'm sure the, the slides will be made available.

If not, that link can be made available to you. Now, I, I've often heard to say that any idiot with an internet connection and XO can create a list and that's quite true, and I didn't want to be the next idiot to do that. So we decided to do things slightly different. We decided to categorize the reg tech landscape and that's pretty difficult in yourself. I'll come onto that. We decided to get a team of SMEs and judges and thankful to Lauren was one of the judges and SMEs.

And we decided actually in the same way that we run events and we run our community, that it wasn't about what I thought was important. It was about what the regulated institutions thought was important. And they're the people that judged it. And I'll come on to talk about some of the, some of the judges a little bit later on really simply the definition in my book. So I'm not a very complicated person, but RegTech is simply the application of technology to help regulated firms satisfy their regulatory obligations.

It really, for me, is that simple. It can be more comprehensive, be as complicated as you want it to be. When we set about the directory, we just said earlier, categorized, first of all, into these these categories. So financial crime is probably familiar to most people got products, addressing money, anti money laundering, fraud, terrorist financing, robbery, and corruption, market integrity, and transparency. So from market surveillance.

So how do organizations, markets, exchanges and infrastructures monitor the activity within the financial markets to prevent and investigate abusive or manipulative behavior? How do I, you know, obviously M two is a massive, massive headline.

Uhm, two brings in some other obligations on different parts of the financial services industry. Best execution is, is one of them and research research transparency is another. So those types of products are in here more and more, you know, reg tech and technology is about how you use the data that you are gathering to solve. A particular use case can be then used at data to solve another information in another use case. And can you use that information in a different way? So we bundle those into a regulatory data and information category, regulatory reporting.

We separated out when the financial stability board looked at the global financial crisis, they started to put in place quite streaming capital ratio and, and liquidity provisions in the financial market. And a lot of organizations spent a lot of time ensuring that they report that information back back to the regulations. We call that regulatory reports in regulatory intelligence and change.

I, I often use the term that regulation is not a project. You know, the project has a start, a middle and, and end regulation is not a project. Doesn't have an end. It's gonna keep going and going and going. So how do you deal with regulatory change? How do you make sure you have a process and, and technology to map change into your business products? And this category is really, really exciting to me. And I started to see quite the change in this space over the last, the last year. I'm gonna rush through this. I apologize cause I'm running short of time, risk analytics and calculations.

So technologies that perform risk calculations for things like capital adequacy. So how do you even calculate, you know, your, your business risk in your market risk and decide and convince the regulators you've got enough aside enough capital to deal with a risk situation.

And how, how is, how does the industry benchmark of course, you know, one of the subjects deal to your heart side of the data, identity, privacy, cetera. I don't even do this topic justice in the, in the red tech directory, but there's clear overlap between for example, identity, you know, how do you identify an individual to prevent money laundering or terrorist financing, and clearly a big, big overlap between things like privacy and some of the, the rec tech space. And then we have a general compliance category.

I was sort of blown away really by the, the breadth and depth of products in the marketplace. And that's where they said, I won't spend much time on this, but we got 32 judges from around the world. They gave up their time for free. They spent, you know, upwards of probably 10 hours helping us to judge the, the results of the, of the directory. We started last July. We competed in September and we announced some winners best in class. We looked at 600 RegTech innovators and we ended up, this is a product based directory.

So if you wanna know more about RegTech, please look at the directory is categorized. So you can, you know, if you're interested in cyber data, privacy identity can search by that category, but we don't allow people running their data, privacy recruitment consultant, for example, to list the directory.

So we, we pure it and make sure there's real technology products in the direct. That's really important to us. We actually asked each company that decided to apply three pretty simple questions. What's the problem you solve? How do you solve it? How do you demonstrate ROI? It's amazing how few companies can actually answer all three of those to really good quality. But we had a couple of rounds of judging and in those rounds of judging curation was the first step.

Secondly, was a paper based review. And then we took 130 products into the paper based review. And then we did a demo day with 50 products in front of those 32 judges. And we announced eight winners, a spotlight winners.

So in the judges' view, the companies that were best able to answer those three questions, here's a quick breakdown of as much as its, here's a quick breakdown of the financial crime category by way above, you know, some, some older magnitude, the largest category, 124 products, just over 26% of the audience companies such as comply advantage that you heard from Charlie dun employee yesterday, people truly owe and shell pay. She'll pay a small startup, been around less than two years, and they're a payment service provider who do instant digital escrow.

So they're aiming at actually, you know, you're doing peer-to-peer payment between two untrusted parties, you know, can we put digital escrow in place for that type of protection of the end consumer market integrity and transparency. So in here you get some massive companies like NASDAQ, but you also get companies like Comera who won the category. A Swiss actually got acquired just after we announced the results.

So again, improving that the cream writers to the top and be attractive regulatory data and information management companies like ATM clause match and Duco they're really looking, do for a reconciliation data normalization platform. So they use data science to help companies answer and produce their regulatory reporting control frameworks. I won't go, I won't go through this cause I know I'm gonna run out time, but as you, as we walk through the categories and this is a sale available all online, so please explore your, your will you see, you know, a smaller set of companies.

As I mentioned earlier in the cyber data privacy, we've got companies like speaking today, companies like Tru you know, this is a great audience to appeal to you. You know, if you were interested in making this the best cyber data, previous identity visuals around tech in the marketplace, please come and see me. We're always looking for individual experts to help assess this space as well. And then finally, just one minute, the red tech market rising and rising and rising, where, where is it gonna stop?

This is the rise from, from 2000 through to last year, actually the end of 2016, we done the 2017 data in here, but a massive increase, you know, less than 10% of these companies existed before the financial crisis. Have you peaked?

You know, I'm not sure. I probably see two or three new rec tech companies a year, sorry, a week, not a year.

Of course, some of those are Reba. You know, they were big data three years ago and now they rec tech. There's no surprise there, but we're gonna see an increasing number of products I predicted in 2018. I would say this cause I'm from UK, but the UK certainly does appear to be a leader in RegTech. And I think there's a few conditions around that. We have a very supportive regulator, you know, of course this might all change post Brexit. We have a supportive regulator.

We have a very big ecosystem of, of startup culture and the, the data bears out and finally have a look, the data insights there you can search, you can filter, you can apply if you are a RegTech company or you believe you've got use case tech in RegTech. And that's it.