Summary
What this article covers in 30 seconds
- Compliance is shifting from a cost burden to a source of customer insight and commercial value.
- RegTech solutions were expected to rise around 30% by 2022 and account for 34% of compliance spend.
- Manual review of audio and documents can leave firms sampling under 5% of interactions.
- AI can direct reviewers towards cases that need follow-up rather than relying on tiny samples.
Recordsure CEO Joe Norburn was featured in Business Reporter’s Future of Banking and FinTech report, exploring how the role of compliance in business strategy is shifting as technology helps firms gain wider commercial value from regulatory activity.
Once viewed as a straitjacket by many financial services firms, the compliance department is changing, driven by customers and amplified by technology.
Driven by regulation and increasingly informed customers, successful financial services firms have realised that understanding customer needs sits at the heart of profit and growth. Compliance, once criticised as an innovation inhibitor, is gaining recognition as a function rich in customer data.
New RegTech innovations are helping teams use this data to improve processes, cut costs and gain customer insight. Compliance is therefore moving from a profit sponge to a value creator.
A new era for compliance
Regulation has moved on from the tick-box, lip-service regime adopted before the 2008 financial crisis. Demonstrating and evidencing that customers receive good experiences and outcomes has become central to compliance operations.
This change in mindset has been carried by new technological innovation, which has supported compliance teams while raising expectations from customers, stakeholders and regulators. It is an international trend. UK and Australian financial services watchdogs, the FCA and ASIC, are conveying a similar message: as new tools become available to aid compliance, firms will increasingly be asked why they are not using them.
Compliance costs have reached high levels for many firms as demands have grown. With RegTech solutions expected to rise around 30% by 2022 and account for 34% of compliance spend, technology is being seen by compliance departments as a way to balance the cost-to-income ratio.
Moving on from a hope and a prayer
As a new era in compliance dawns, regulated firms are waking up to the value that disruptive technology offers. One area under scrutiny is monitoring customer conversations for compliance purposes.
Historically, firms have relied on labour-intensive processes in which reviewers manually trawl through correspondence and listen to audio recordings to determine compliance. Written documentation can quickly reach a high page count, and every hour of audio recordings takes around three hours to review.
Given the volume of interactions an organisation can have with customers each day, monitoring at scale becomes difficult. Firms are forced to rely on small-scale sampling, typically reviewing under 5% of the total pool and hoping systemic issues are found. That leaves a blind spot and exposes firms to regulatory and customer care risks.
Changing the status quo
The status quo has remained unchanged and unchallenged for years. Traditional methods are now reaching the end of their shelf life as technology makes it possible to manage new data in smarter ways.
Emerging technologies are changing legacy systems and taking much of the heavy lifting from compliance teams. Review teams can use AI to interpret customer interactions, dissect data at scale and direct them towards cases that genuinely need follow-up action.
In practice, this is the difference between probing a tiny sample and hoping to find a needle in a haystack, and surveying the full landscape so resources can be targeted where they are needed.
Compliance as a competitive advantage
The impact goes beyond traditional compliance areas such as risk management and operational efficiency. There are wider benefits from unlocking profit-making data held within customer interactions.
Understanding customer interactions and turning data into usable information underpins customer care, improves sales messaging and supports training. As a result, firms may improve how they target, sell to and serve customers, creating competitive advantage.
The role of compliance in business strategy is beginning to shift from cost creator to potential profit maker. Compliance teams are better placed than ever to provide tangible commercial value beyond their regulatory obligations.
Frequently asked questions
He was featured in Business Reporter’s Future of Banking and FinTech report.
Regulators such as the FCA and ASIC increasingly ask why firms are not using available tools to support compliance.
Written documentation can be lengthy, every hour of audio takes around three hours to review, and firms may sample under 5% of interactions.
By interpreting interaction data at scale, it can support customer care, sales messaging, training and better targeting of review resources.