Archive:September 12, 2016

To support payments innovation, avoid unnecessary regulation
Regtech Earns a Name

To support payments innovation, avoid unnecessary regulation

By John R. Gardner

The rapid growth of new payment system innovation in recent years in many ways mirrors similar growth in the credit card industry in the 1950s and 1960s.  A review of the development of the credit card industry leading up to the significant amendments to the Truth in Lending Act in 1970, and the ultimate effect of the legislation when viewed against the concerns voiced by Congress, arguably demonstrate that the legislation was unnecessary, inefficient and anticompetitive. Accordingly, legislatures and regulators should take a cautious approach to enacting restrictions proposed in the name of consumer protection.  To avoid the mistakes of the past, legislatures and regulators should carefully consider how such measures might limit competition and innovation, whether such measures would truly result in a benefit to consumers, and whether there are any less restrictive measures that would result in equivalent consumer protection.

You can read my full article here.

Regtech Earns a Name

By Susan Altman

Technology solutions for bank regulatory requirements have been around for decades, but their soaring popularity has led to them earning their own nickname within the fintech world: they’re now “regtech” solutions, according to a new report issued by Bain & Co. in the American Banker.  Regtech products are designed to benefit banks’ efforts to comply with growing regulatory burdens and improve internal governance controls.  Bain estimates that governance, risk and compliance costs account for 15% to 20% of the total “run the bank” cost base of most major banks.  It’s no small wonder that banks are struggling to devise a robust and efficient approach to compliance and are outsourcing the implementation and hosting of advanced compliance tools with nimble regtech-focused outside vendors.  Bain has identified more than 80 emerging regtechs that extract and structure data, integrate data from banks’ proprietary systems, third-party data providers and public sources, and crunch the data in automated, scalable ways.  Artificial intelligence, or machine learning, continuously improves the quality, precision and reliability of the insights that emerge.

Bain predicts that banks’ relationships with regtechs will be significantly shaped by regulators, in the form of governance, risk and compliance standards and approval of proposed solutions. As new requirements go into effect, banks will need to continuously assess the level of functionality, complexity and efficiency of current technology, systems and data.  And did we mention, this all has to be done in a very secure environment?

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