REGTECH | Mr. Nicolo Petrone | World Finance Council | Fintech Dubai


this morning the word REGTECH came up
a few times so my objective for this keynote would be to really explain you
which has been the journey in REGTECH over the last three years I want to see a few
use cases in order to drill down on Various companies which I think are
very good companies in the space and I also want to have a sizing of the market
potential for Regtech companies which is ultimately the reason why you know these
companies have been being founded heavily in the last couple of years so
just to give you a bit of background of our journey in FinTech so we started
1994 with defining you know the first pattern for mobile payments we then we
work on Verizon on the first joint venture from for mobile payments with
you today call Apple pay or some thing pay then we shifted on the
conference site called money 2020 and over the last three years in which have
been actually involved it’s been the launch of let’s stock payments which was
a website for fin tech insights and now we have the market network for fintech
called mainship now the first time I heard the word reg tech was actually me
2015 few of hours for our institution partners and consulting companies called
us say hey you know what the complaints costs are going high they’re growing a
lot there is over-regulation there is a lot of complexity in the regulatory side
it say okay let’s let’s discuss right so we look at the numbers and as you can
see pre-crisis so this is the compliance
cost as a percentage of operating costs per box so before crisis it was about
two to two and half percent depending on the business line after it went up to
four five four four point five percent which is a big increase then we started
receiving calls from investors saying there is a huge opportunity
right the market is growing and and that’s why we classify your Regtech as
a Fintech vertical now the next step is to understand why Regtech became
so relevant and many people think Regtech is just
technology are applied to compliance but this is not true and I’ll
tell you why so after the financial crisis many
things happened like 20 to 22 trillion dollars erased in economic value 20-27
million people were unemployed so basically the regulator was applying to
step in they wanted to put some regulation they wanted to make sure they
could protect the consumers from similar issues as they saw before that’s why
they increase the capital requirements for banks right the banks were taking
less risks and the compliance costs were increasing because the number of
regulation rolling out was huge the effect of these was decreasing in return
on equity for banks before the crisis was about 15 percent in developing
countries and after it was between eight and ten percent now the effect is that
this only actually change the business model banks not all not not the business
but the business model because the way they were operating radically changed
and this is the sweet spot of Regtech company selected companies my definition
they support banks in adapting their business model in a fast pacing
environment they are not technology provided like ASAP or or others now if
we say that this is an opportunity for Regtech companies how can we how can we
size the opportunity so we make some numbers we crunch some numbers and we
said okay 2015 financial servicable GRC spending so global governance risk
and compliance was 78 billion and 32 percent was investing
technology our projection for 2020 is 118 billion and 54 percent spending
technology now if he also add to this number the fines that banks have been
paying which is you know 45 fold between 2010 and 2014 then we can estimate the
Regtech market market potential is about 100 billion dollars boom
we have 217 companies Regtech which were in fact which were founded in the last
three years so that’s an impressive number
In data sheet about 3.5 billion dollars that will give us the financial institution
on which area they are actually spending most of each year see and these are the
use cases so risk management compliance audit management in automatic controls
which ultimately become the main use cases in Regtech not the only use cases
but the main one and for each vertical you know I wanted to show a few big
companies according to us now leaving the boring stuff I think the next step
would be really to drill down on the use cases but also to understand why Regtech
the company and gain advantage in comparison to a tech company and these
are the reason in in our opinion first of all Regtech company respect
to a pure technology company will offer much better customer experience on the
on boarding process on the only on the digital experience alright even if when
you sign up for a new service you don’t want to send your documents for
verification you want to have the verification instantly second Financial
Inclusion and now we’ll be talking in some time
about a use case of a company Regtech also using blockchain for vacuum then we
have vector kYC which goes into the customer experience we have increasing
profitability because you don’t want to spend too much on compliance scalability
of the service most of Regtech companies and products are on cloud so
they are perfectly scalable and there you know much easier product advanced
analytics and better reporting now the boring stuff is finished right so we
think only use cases first company in the KYC aml-90 from a stream and we have
analyzed pretty much every company in the space we’re eating this company is
great so what they’ve done starting from 2011 which is you know I would say the
first company in Regtech they they can they can verify 2500 different types of
documents they do things very quickly and they operate in 95 countries which
is which is good second company bank you digital identity when I when I said
before that Regtech will enable Financial Inclusion is true because now
government will recognize proof of an entity either a document released by a
document or they will be looking at your financial transactions internationally
screen this company is doing something different because they say oh in the
world there are so many bad people 60% of these people they have a mobile phone
so how can we use blockchain for recording transactions starting from
that element and you know the founder is is doing a great job in Africa but also
in many other countries in
emerging economies tertius case a company called X Anika specific for
reporting and compliance now the different the difficult thing when you
think about reporting is basically that you need to collect data and you need to
create linkages between data and you need to do that in a periodic fashion
because if there are updates on the regulations we need to make sure you you
can record all these changes various company using great technology similar
one is also swadden that solves exactly same issue theta beta linkage data
collection last use case for today is algo dynamic which is a proof that many
vector companies are really using advanced analytics in a much better way
than other technology providers so this this company is selling their product to
family offices for also to investment managers and they can predict with some
days or weeks in advance no major shift in the in the market in
they don’t need historical data and they don’t need you know to to record you
know previous disrupting events so I can decide the relevant use cases I want to
just give you a brief overview of directx pace how big is that which are
the players in the use cases thank you you you

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