The public doesn’t trust bankers, so let’s turn them into robots
The public still doesn’t trust bankers. They remember the financial crisis, and they believe banking still needs more regulation worldwide.
Forty-nine per cent of Americans think the government hasn’t gone far enough to regulate financial institutions and markets, according to a new survey from Pew. Fewer — at 42 per cent — think the government has gone too far.
In reality, regulation has gone through the roof since 2008. Every other week it seems like a new 100-page regulatory handbook is passed down to risk-management staff. They feel overwhelmed, overstretched, overworked.
At the same time, our banks are spending huge sums bringing in new processes to comply with these regulations. They’re paying millions, even billions, to upend their systems. And millions more to hire the new staff needed to keep compliant.
According to the US Office of Management and Budget, the cost of new regulations passed since 1980 is around $250 billion per year. In the EU, Johannes-Jörg Riegler, CEO of German bank BayernLB, said that up to one in three banks could go under in the EU soon because of the cost of regulation.
But, how can the financial sector square this circle? How can they regain the respect and confidence of the public, while making sure that they’re not strangled to death by costly regulation?
It’s public confidence that matters
The average member of the public doesn’t know much about the financial sector. Why should they? But just because they’re not experts, these polling figures must worry us. They’re our customers and they can’t be ignored.
These polls are an early warning system. If we ignore them, we risk further public anger and backlashes against the financial sector. And that only leads one way: more costly regulations and expensive rules.
The media coverage of the financial sector is perhaps partly to blame. Reporters and editors at all the big national newspapers like to focus on the big bad stories, quite understandably.
So, we have banking scandals making headlines in the UK, USA, and around the world on almost a weekly basis. Just look at the headlines from the last month.
In Canada, Manulife has been fined C$1.15m for violating anti-money laundering laws. In the UK, HSBC is being probed by the FCA for the same offense. And it was revealed that Deutsche Bank was hit with £500m of money laundering fines.
But even if we lament reporters not covering the reams of good news, there does still seem to be a lot falling through the cracks. These headlines haven’t come from nowhere. These stories haven’t been invented by journalists — they’re not ‘fake news’.
And telling the public about the extra regulations doesn’t seem to be reassuring them either. I can hear a good friend saying to me now: “I believe it, but it obviously isn’t working because scandals are still happening.”
Technology may be a powerful solution
But, in the face of these two pressures — the need to command public confidence while giving our banks the regulatory space to grow — there are early signs that technology may be able to create a solution to both. Two for one, as it were.
Faced with rising compliance bills, technology provides us with the tools to automate more processes. Deloitte recently estimated that regtech could reduce labour bills for regulatory functions by between 30 to 70%. That’s a huge saving.
It can also reduce errors. Many compliance departments right now are stretched to the absolute limit. Saving resources through technology means that staff can be redeployed elsewhere to stop potential problems falling through the cracks.
But, regtech could also be a powerful antidote to the problem of public sentiment. The public feel that the banking sector is out of control. That bankers are out of control. That there’s nothing we can do to stop these scandals.
Whereas people trust automation — they understand it; it’s everywhere in their daily lives. They know that robots don’t have emotions, bad intentions, or otherwise. They just do the task, accurately, and fast.
As well as actually improving the functioning and safety of the banking system, technology provides the public with the feeling that it is genuinely safer too. Today, robots feel a lot safer than human hands, especially human hands that have been vilified in the press.
The beauty of this solution is that rather than taking up more of our resources, the adoption of technology will actually provide banks with more breathing space, flexibility, and adaptability. It will provide our banks with more time and space to grow.
It has always been difficult for the financial services industries to command the confidence of the public. Technology has the power to help us do that, right now.
Mark Holmes is CEO of Waymark Tech, a regtech firm that provides financial organisations with time-critical, personalised information about the changing regulatory landscape.
Its technology helps clients drive efficiencies, reduce dependency on lawyers, and get relevant, actionable information on changing regulations. You can contact Mark at email@example.com.