At W2, we sit very squarely amongst the regtech space, providing fintech businesses, among other industries, with the regulatory compliance solutions they need. Giving them the tools needed whilst allowing for scalability and direct integration to remove the need for manual intervention to onboard customers is something that particularly fintech’s, who tend to share the same values we do when it comes to technology and innovation, see as a key benefit that W2 can offer to our clients to them.
Recent report from one of W2’s Partners, Moorwand, highlighted how fintech’s fuel growth through the use of outsourcing to specialist providers. The report brought to light a number of unsurprising statistics to bring more attention to the rise of the fintech industry and what impact the various aspects of the eco-system have had on that growth in the past decade.
Fintech has truly established itself as one of the most exciting and adaptable industries worldwide, whether that’s the exponential growth of what could be considered founding entities of fintech in Monzo and gohenry, or whether it’s the rise of hundreds of successful and innovative fintech’s each year, it would be hard to deny that fintech has proved itself as not ‘the next big thing’, but the industry of the present.
But despite W2 celebrating its tenth birthday this month, regtech still isn’t a topic that is spoken about nearly as much as fintech. Regulatory compliance is not something that is a nice to have for fintechs, with 100% of respondents within the report citing compliance as a key benefit of outsourcing and £1 million in additional revenue generated through specialist partners, there seems to be a disconnect with how important regtech is to fintechs and the actual awareness of the concept of regtech to the wider industry.
Traditional high street banks will employ hundreds of employees to satisfy compliance procedures manually, but fintech is based on technology and streamlining processes with the resource available. As Huw Davies, Co-Founder and CCO of OzoneAPI rightly pointed out within the report, “it’s incredibly hard to be the best at everything. The older I’ve got, and the longer Ozone API has been around, the more I realise that I am far more effective if I focus on my strengths and surround myself with people who have complementary strengths.”
Gone are the days of needing manual verification, regtech solutions are built to provide the compliance needed based on requirements from bodies such as the Financial Conduct Authority (FCA) and the European Banking Authority (EBA) but are also designed to not impact the customer journey for clients. After all, regulation is in place to prevent negative and potentially business ruining individuals from infiltrating businesses through fraud and money laundering, but those customers who want to use fintech as opposed to traditional banking legitimately, want, and deserve to be onboarded as quick as possible.
Through the W2 Partner Network and the value that partners, such as Moorwand bring, W2 has been able to join and provide value to the fintech eco-system which gives start-up businesses the opportunity and tools needed to grow their business and join the flourishing fintech industry. What we at W2 are trying to figure out, is how the regtech industry can learn from the collaborative efforts that fintech has developed and what positive impact that can have on the industry that W2 sits in.
Despite 100% of respondents citing compliance as a key benefit to outsourcing, it was also found that outsourcing Know Your Customer (KYC) and onboarding increases by 11% among fintech’s over five years old, but that figure still only means that around 50% of fintech are outsourcing their KYC and onboarding. Going back to Huw Davies’ point around being aware of what you are good at and seeking resource for that which you are not good at, regtech still has 50% of the fintech market untouched, and the likelihood is that these companies not outsourcing KYC and onboarding are using manual processes similar to the high street banks, and quite frankly wasting resource.
Joanne Dewar, CEO of Thredd, another member of the W2 Partner Network added to the report “the fintech sector is coming out of adolescence and reaching maturity, and as fintechs grow and seek to expand into new market or add adjacent services, their requirements become much more complex and nuanced.” This perfectly sums up the state of play in fintech in 2021, the more the industry grows and develops, the more companies realise that specialists are there for a reason; to provide further value than internal resource can provide.
Regtech and fintech go hand in hand. What the regtech industry can learn from the success of fintech is that collaboration with others who share not only the same values but same quality of services as other specialists in the arena can bring expansive growth and bring regtech to the forefront of priority for any business needing to verify customers. With broader applications in both governance and financial services, expect to see regtech services such as social media archiving blossoming in the not too distant future.
It’s a work in progress for sure. But using the power of partners and collaboration, regtech can reach the heights of fintech and prove that it, alongside other specialist providers in the eco-system of financial services, brings value far beyond using generalist providers. We at W2 are working towards bringing up that figure showing 50% of fintech’s outsourcing KYC and onboarding to specialists. Regtech could definitely still be considered as in early adolescence, but when W2 was founded back in 2011, we were one of the first of our business type, and year by year the industry becomes more competitive.
What this fantastic report from Moorwand has brought to light for us is that the industry needs more collaboration, and we need to use the power of other specialists to ensure that regtech is commonly known wider than the core fintech community.
For more information on Moorwand’s ‘Specialists vs. Generalists: how do fintech’s fuel growth?’ report, click here.