Financial Regulation - Tsunami or Global Warming?

How routine activities associated with increasing regulation are creating a barrier to product innovation and customer experience.


Scott McClesky, Global head of regulatory intelligence at Thomson Reuters, recently mused* on the shift in people’s thinking when it comes to regulation:

"People used to talk about regulation in terms of a tsunami that would wreak havoc and then go. This is more like global warming, in that the tide just continues to rise”.

It’s frustrating because the mundane and routine activities associated with increasing regulation are a real barrier to what the financial services industry would really like to be focusing on - product innovation and customer experience.

As a Senior Manager from Commonwealth Bank recently observed: 

"Remove the routine activities sucking up 80% of your product team’s time and see how the customer experience blossoms”.

At Objective, we wanted to better understand the scale of the problem. Why are product teams spending so much of their time dealing with the routine activities associated with regulation? Why are they spending so little time on designing innovative products that improve the customer experience?

We surveyed 118 banking and insurance executives across Australia and New Zealand and the results were alarming.

The survey unearthed palpable concern over the pace of regulatory change, the challenge of producing consistent, compliance-ready documentation, as well as the conspicuous lack of infrastructure to support the continuous rollout of product disclosure statements (PDS).

Check out the full story here.


What’s most interesting from the survey results is the clear mis-alignment of organisational focus and the operational impact of the "rising tide".

As regulation increases, without the resources to adequately deal with it, product teams will be forced into a stark choice:

  • Spend more time on meeting disclosure requirements - resulting in reduced ability to innovate; or
  • Spend less time - resulting in increased exposure to organisational risk, especially around the bane of any product manager’s life, the Product Disclosure Statement (PDS).

Indeed, the risk of regulatory breach, as a result of the increased regulator burden, came out as the number one concern of those surveyed.

One of these risks, as many of you have probably experienced, is the risk of errors in the fees and cost disclosure which can lead to lengthy remediation and paying sometimes thousands or even millions of dollars in compensation to members.


We’ve all, of course, been sold the #regtech future - where advanced technologies like fuzzy logic, automated risk analysis, online fraud detection and behavioural profiling will markedly reduce the regulatory burden on individuals within organisations, freeing them up to focus on delivering superior customer experiences based on innovative products and product combinations.

But many of these technologies are still in their infancy and, whilst we get excited about the “Precrime” predictive policing system of the Minority Report movie, we miss the potential of #regtech technology already available today.

One example of this is Artemis, from Red Marker, which is being used by ANZ and Westpac here in Australia, to monitor content on the bank's websites to ensure it complies with regulations.

Another is our own Objective Keystone technology, which is being used by 3 of the big 4 banks in Australia, to automate the more mundane compliance tasks associated with meeting compliance and reporting obligations, and to reduce operational risks.

As Peter Deanes, Chief Risk Officer at the Bank of Queensland said in an interview with FST Media earlier this year, 

"We are now seeing many new ideas and innovations that offer enormous benefits in terms of both the customer experience and cost to service, such as automation of manual processes."

A recent whitepaper, produced by FST Media based on our survey results, goes into a little more detail: 

"Adopting leading-edge automation technology presents an opportunity to re-engineer and streamline existing collaborative authoring processes whilst mitigating prevailing risks. These state-of-the-art documentation technologies serve not only to reduce onerous OpEx and risk of non-compliance, but moreover increase governance, workforce productivity, efficiency and, ultimately, customer satisfaction.”


Regulation will not peak and then recede (like a tsunami), rather it will continue its insidious rise, killing innovation in its tracks.

Like every other such challenge in modern history, the answer, as it always has been, is found in new ways of working, new approaches to solving old problems, and, of course, technology.We may not yet benefit from the entirety of the #regtech dream, but for those already utilising the available technology, in the words of Erasmus (quoted in Minority Report),

"In the land of the blind, the one eyed man is king."

To find out more about Objective Keystone, and how it is being used by major financial organisations to help remove the routine activities sucking up 80% of your product teams time, visit our website or contact Objective directly for a chat.

Graphs from "The impact of financial regulatory change on productivity and innovation" published by FST Media in association with Objective Corporation, March 2017.

Other images from iStockPhoto

* Comment on the paper “How the rise of modern regulation is changing the finance industry” Published by Thomson Reuters in its Q3 Trust Index


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