Bank Compliance and The Sharing Economy

89% of respondents interviewed by Accenture in its 2018 Compliance Risk Study believed that investment in compliance will continue over the next two years, this is a result of the emphasis on technology as against headcount. The cost and intricacies of regulatory compliance remain a challenge for banks, irrespective of their sizes. While medium and small-sized banks grapple with the challenge of finding skilled staffs who are able to deploy the corresponding technology, the associated financial burden and managerial cost, larger banks, on the other hand, have to deal with the burden of dealing with enormous Know Your Customer (KYC) regulations and address anti-money laundering.

The evolution of latest technologies has been efficiently deployed by banks in addressing emerging risks in money laundering and other related financial crimes. These technologies include machine learning, artificial intelligence, automation and sophisticated analytics. Banks that do not have the financial capacity to deploy these technologies or are unable to attract employees with the required skills to implement these technologies are disadvantaged and cannot compete favorably with competitors that have deployed these technologies to checkmate financial crime and fraud.

Small and medium-sized banks that most compete with larger banks have sort to find innovative ways around this challenge. The cost associated with creating and maintaining application platforms and data marketplace that are embedded with analytical tools, automatic reporting and data models which can communicate with several required application program interfaces (APIs) is quite exorbitant, this is also further compounded by security concern since sensitive customers’ information, privacy and data must be protected at all cost from hackers. These banks have therefore relied on shared platforms that are capable of delivering first-rate customer experience, while some other banks are currently testing a utility framework that is based on collective sharing of non-competitive data sets, thereby increasing risk management on one hand, while also enhancing compliance.

This new approach, therefore, allows a collection of banks to leverage on an open-source host platform while having the capability to perform either all or part of a control process. Payment is made through commercial flexibility, via a pay-as-you-go model of payment that allows continuous improvements from various contributors on its open-source host platforms, made sustainable by investments made by the host platform. This collective input and investment help to push innovation forward, while enabling the banks to be open to other emerging technologies that reduce their technical debt.

Innovative technologies like artificial intelligence, natural language processing, machine learning and blockchain are beginning to occupy center stage, even though the use of analytics and big data in compliance and risk management is already deeply rooted. There are also newer technologies that are emerging, technologies like quantum computing will also be implemented in compliance and risk management in no distant time.

Banks who are already taking advantages of current compliance utilities, especially by using open source host platforms that harness the power of collective data and several inputs, will be able to update their capabilities as newer and more intricate risks emerge in the future. In fact, it is expected that more banks will partner and share data across non-competitive functions to tremendously increase their risk management capabilities while drastically cutting down the cost of compliance, thereby creating the sharing economy.