When innovation and technology are global and rapid, can financial services keep up?

by: Kitty Parry

Twitter: @KittyParry

Did you know a tenth of HSBC’s workforce is in compliance? Or that the average corporate fine from the UK regulator increased nearly seven-fold from 2010 to 2013 – with similar trends being seen across the SEC and other global regulators?

This regulatory clampdown is happening at a time technology is transforming our world. A look at the private companies making it into the “unicorn club” (worth $1bn+) bears this out: they are virtually all tech-based. We are changing the way we live. Social media is a case in point. Communication, arguably the basis of human experience, has suddenly in a few short years shifted online and into the public forum catapulting firms onto a global platform. How are financial services supposed to adapt to breakneck technological change with a regulator still based on country silos? What are the dangers if they don’t? On the regulatory side, testimonials are one specific example, with Linkedin endorsements proving a huge challenge for regulated financial service firms managing their employee’s use of testimonials compliantly.

Looking ahead, how are the regulators ever going to effectively and consistently regulate a globalized finance industry? As we hear so regularly, the banks have blockbuster budgets that give them access to the world’s finest minds and technology. So on the one hand, examples of regulatory overreach can be found in recent years such as the FSA vs. Einhorn case. On the other hand, regulatory oversight is also evident: practices that shouldn’t have gone on within the industry, did – just look at recent cases of rogue trading.

Whichever way you look at it, it is clear that the regulators and the finance industry are a mismatch of forces: as long as they battle each other, a sub-optimal outcome will occur. The key is to get us all working together through a global conversation, and then embedding best practice through effective training for staff.

The status quo, where banks are building “war chests” of fine money into their forecasts such as Barclays £2bn contingency, will only drive the industry’s reputation further into the abyss. Instead, industry must address these challenges head on, and show the public and regulator it is dancing to a new tune: one that expounds creativity and ethics in technology use, not creative ethics.

Editors Notes: This entry has been submitted to the FINTECH Book, the world’s 1st globally crowd-sourced book on FINTECH. Readers that enjoyed this initial abstract are invited to share and like it so that it may be featured in a longer version.

The FINTECH Book is due to be released in April 2016 and is available for Pre-Order on Amazon.