The Regtech Association (RTA) has welcomed the recommendations in the final report from the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, saying the changes represent a huge opportunity for the sector.
"Australia is a global leader in the regtech industry but up until now, there has been more talk and not a lot of action. The RTA looks forward to that changing," the association said in a statement following the release of the report by Commissioner Kenneth Hayne on Monday.
Many of the 76 recommended changes — all of which the government will be taking "action" on, Treasurer Josh Frydenberg said — have "off-the-shelf regtech solutions" the association explained.
Among the recommendations in Hayne's report is the recommended expansion of ‘BEAR’ — the Banking Executive Accountability Regime — to cover insurance and superannuation providers.
The regime currently covers individuals in banks that have senior executive roles, including individuals such as chief information officers or chief technology officers that have responsibility for IT systems.
The RTA, which was established in 2017 and named its first CEO in September, said companies in the insurance and superannuation sectors have the opportunity to implement BEAR "using the latest automation and not start off down the spreadsheet path".
According to KPMG, the big Australian banks spent between $350 million and $450 million on regulation and compliance each year.
To counter these significant costs, banks are exploring how automation and AI can help them stay compliant.
The Commonwealth Bank of Australia (CBA) in May revealed the results of a regtech pilot that uses natural language processing and artificial intelligence to convert regulatory texts into compliance obligations. Despite the promising results of this and other experiments it is taking a “proceed with caution” approach to regtech.
AMP chief technology officer Chris Bell in June said the Royal Commission had ‘amped up’ the appetite for AI within the organisation.
“I think the opportunity to put machine learning and advanced analytics in play with a lot of the compliance activities that we have in train at the moment is absolutely there,” Bell told CIO Australia.
The problem for regtech providers is that lengthy procurement processes at large financial institutions continue to be a hindrance.
“The biggest roadblock to accelerating regtech adoption is the buying process. It can take up to two years from first conversations to deployment of regtech solutions," said RTA chairman and CEO of GRC Solutions Julian Fenwick.
"Compliance teams need to get comfortable buying technology and IT and procurement need to get regtech savvy. Since there is a global shortage of compliance professionals, and their backgrounds tend not to be technology, this is a human problem that is going to challenge the industry as it implements the Hayne recommendations,” he added.
CEO of Verifier and RTA director Lisa Schutz, added that now was the time for greater regulatory trechnology adoption, saying: "throwing more staff at compliance won’t deliver better outcomes.”
Some 52 organisations are members of the RTA, including Microsoft, CBA, Equifax Australia, Deloitte, Toyota Financial Services and Bank of Queensland.
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