How RegTechs Get it So Wrong

Written by
Joshua Dent

Delivery Lead
ESG Ambassador

Published on

14 July 2022

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Aurora’s Regulatory Technology (RegTech) Delivery Lead Joshua Dent discusses the challenges for the RegTech sector and how solution providers can overcome these to stand out from the crowd in an increasingly competitive market.

RegTech, a sector in rapid growth 

We are living through a significant period of uncertainty - a statement very few would argue with. The challenge now is that we appear to be transitioning from one period of uncertainty and into another. 

For the last 2 years, Covid-19 presented a unique set of challenges. This forced us to work remotely, literally overnight, yet the economy and the operations of the financial institutions (FIs) underpinning it had to continue. Today, this remote environment is second nature and almost entirely facilitated by technology. In the Financial Services sector, growing trends pre-pandemic such as virtual KYC and digital Onboarding have rapidly accelerated. 

Fast-forward six months and we now find ourselves in cost-of-living crisis. This has been partly fuelled by sanctions imposed on Russia, which has led to a rise in interest rates as the Bank of England attempts to control inflation. Although this situation is likely to slow down the unprecedented levels of investment into the Regulatory Technology (RegTech) sector seen in 2021, there are now a plethora of solutions that benefitted from the $18.9 billion (FinTech Global, January 2022) invested, as well as others, who are competing for the attention of decision-makers within FIs. Meanwhile, FIs look to digitally onboard clients quicker than their competitors and, more importantly, stay compliant in a world fraught with regulatory risk. 

What the Financial Conduct Authority (FCA) has told us

With so many emerging RegTech players, each claiming to solve a different part of the puzzle, how can buyers of the technology possibly piece it all together? 

The answer… they can’t. 

This is not a revelation either. In June 2021, the FCA released an article called ‘The future of RegTech – what do firms really want?’ in which they conducted 500 online interviews and 20 in-depth interviews with senior decision makers in Compliance or Innovation roles at UK-based FS businesses with 200+ employees. As well as establishing that there is significant demand for RegTech among Financial Institutions, the research identified two key areas for improvement that decision-makers wanted to see from the RegTech sector: vendor communication and technology integration. 

41% of respondents said that RegTechs could be clearer and better at presenting their offerings, with the emphasis on better articulation of the problem their product is aimed at and the solution it provides. This was highlighted as a key step towards increased adoption. 

Other key improvement areas were the need for better interoperability (38%) and integration of technology (41%), particularly where large and complex legacy systems are involved. We now see more and more RegTechs taking an API-led approach and FIs are starting to recognise the importance up-front planning, organisational alignment, and a technology and data blueprint to ensure the smooth delivery of technology. In many instances, however, this is a result of having got it wrong in the past. 

Where Aurora sees it going wrong

What we continue to see across the RegTech ecosystem is confusing, un-targeted messaging. This sector often covers complex domain areas, processes, and concepts, that may be at a level of detail way below the recipient’s visibility within their organisation. Yet many players fire through function and feature-led demos at breakneck speed on a mission to showcase everything their platform has to offer. In some cases, this is before even understanding the problem statement, the recipient’s goals, and motivations, or what’s keeping them awake at night. 

Please, stop. You can do this better. 

Many RegTechs might not realise they are doing it. What Aroura often asks, in order to expose the symptoms, are questions like “are the sales of your product at the level you would expect for a solution of its capability?”, “are you winning many deals when pitching against your closest competitors?” and “do you maintain the level of engagement and interest you’re looking for when pitching or demoing your solution to prospective clients?”. 

If the answer to any of these questions is “no”, it may be time to look at how your messaging, sales collateral and marketing content is positing your solution in the market. Of course, it could be the product, it could be the effects of a crowded market, but either way there is an opportunity to take a refreshed messaging approach that really talks to the pain points and desired outcomes of your target audience. 

As technologists, RegTech leaders sometimes like to show a new feature they’ve just added or dive into the ‘back-end’ of the system, but this might not solve the prospect’s specific challenges or achieve the benefits they are looking for. The result is a disconnect between the person delivering the pitch or demo and the person on the receiving end. 

How Aurora helps RegTechs succeed

What we do at Aurora is work with RegTechs to initially understand their solution set, their sales approach today, and where they’ve had wins and losses. We look for trends, patterns, and opportunity areas for product differentiation, leveraging our deep domain knowledge and expansive view of the ecosystem. We then work with sales teams, marketing teams, product teams and leaders within the organisation to craft tailored, differentiated messaging that helps RegTech solutions stand out from the crowd. Finally, we help firms disseminate this throughout the business, into sales and marketing collateral, training content and strategic initiatives. 

Previous RegTech clients have seen positive cultural changes resulting from the work as well as a marked increase in sales opportunities and more engaged prospects. On the other side of the coin, FI decision makers benefit from simpler messaging that they understand from RegTechs that can speak their language. 

If you’d like to discuss this article further or learn more about how we can help your organisation, please get in touch at Joshua@AuroraSDE.com.

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