Ask Me AnyFin With Apiax: What Is RegTech? On Regulations and How to Handle Them

At some point anyone who ventures into financial services has to try and navigate the tricky maze of compliance and other regulations. In this episode of Ask Me AnyFin we chat with Alan Blanchard to find out how RegTech can help businesses easily comply with constantly changing regulations. How to keep up with these changes? What interesting solutions are available in the market? You’ll find the answers in our interview!

The RegTech expert says, “Ask Me AnyFin,” and is not afraid to answer

You can watch our interview below and read the transcript.

A career driven by digitalisation efforts

Adam Pogorzelski: Welcome to the next episode of Ask Me AnyFin, our series of conversations with FinTech insiders. Our guests today are Alan Blanchard, Head of Business Development at Apiax, and Sonia Sarha, Field Marketing Manager at the same company. Great to have you here.

Alan, your career path in recent years has been developing in the field of regulations and compliance. You worked for the Financial Conduct Authority (FCA). So we can say metaphorically, obviously, that you have seen all nine circles of regulatory hell, at least according to Dante’s description. And if we stick to this analogy, we can say that you moved from hell to a regulatory heaven which is a RegTech company called Apiax.

But before we focus on Apiax itself, I would like to start with a personal question. What force is driving your career in the field of regulations?

Alan Blanchard: Thank you so much for inviting me onto the show.

Of course, there is a driving force that sits behind that, you’re very astute to spot that. Actually, it comes from when I started my first job, which was at a legal publisher, Butterworths as it then was, LexisNexis as it is now.

Back in 1998, the company had a project to digitise all of its traditional books and written content and put them on this fantastic invention called the Internet. Our users were very enthusiastic about this. They didn’t have to wade through all these paper books anymore. They could just do a search and get the answer. But they weren’t very happy with that because what they wanted was just to be told what the answer was. I want to ask my question and I want to be told the answer. And for a variety of reasons, we couldn’t do that back in 1998. But it’s a problem I’ve certainly been trying to crack ever since then.Then I moved out of the commercial publishing world into the FCA, as you quite rightly say. Here we were looking from a regulatory point of view, a sort of public information point of view. Could we produce the digital rules for compliance to be done automatically? It’s the same thread coming all the way through.

I think eventually we will get to the point where we have these digital rules, Yes/No interfaces, but it’s going to take a little while.

Hence joining Apiax because we’re doing it. We’re able to give you the answer to your question when you have an issue.

RegTech — where regulations meet innovation

Malgorzata Labanowska: Before we go deeper into the world of regulations, let’s try and find the simplest definition of what they are, because for me personally, it’s quite an abstract notion. But maybe you can tell us what your understanding of regulation is at Apiax.

Alan Blanchard: So what is regulation? The obvious question there is: why is there an authority asking me to comply with a set of rules? I live in a free country. I want to make some money. I run a business. Why can’t I just go ahead and enter a market and make some money? And the answer to that is because the rules are there to regulate the market, to ensure fairness, to show everyone is operating to a high standard, and to ensure trust and confidence.You see this in the contrast between countries that have a highly regulated environment like the UK and those where the regulation isn’t as stringent. And it turns out, from the business point of view, it’s not a good place to do business if you’re working in a less regulated environment unless, of course, you’re a bad actor and you’re looking to exploit the lack of regulation there.

In short, regulations are necessary for these money markets to operate and for the benefit of society, for you as a person, a member of society participating in these marketplaces.

Adam Pogorzelski: I would like to stop to discuss quite a new term called RegTech that, in my opinion, is used for all solutions that are helping businesses with regulations by using technology. But my definition doesn’t say too much, I believe. So let’s try to shed a bit more light on what RegTech is actually about, because it seems that we can distinguish two major types of RegTech solutions.

The first type is about allowing businesses to discover and understand the regulatory ecosystem. It’s about awareness and knowledge of regulations.

The second type is about delivering ready-to-use technical solutions that implement a specific business process that is required by regulators. For example, it might be user onboarding or a KYC solution.

I’m curious about your understanding of RegTech. Can you tell us your own definition of it, especially from the perspective of your experience in this field? What do regulation and Tech mean together?

Alan Blanchard: I think you’ve got a very good understanding there of what it means. When I look back at my time at the FCA, when we talked to regulated firms about what we could do to improve the FCA handbook there, they basically only had two problems. The first one being that they couldn’t find all the rules that they needed to follow. The second one being that if they did manage to find them, then they couldn’t understand how to comply with what was actually being asked of them. So incredible tension there. 

I think that derives from the fact that the firms themselves just want a tick box list of things they need to comply with. “I’ve done that so I’m going to tick that off.” Whereas the regulator wants a principles-based, sort of behaviour-driven set of requirements to say, “Look, it’s up to you how you run your organisation. We just need it run to this certain standard.” So there’s increasing tension there.

The role of RegTech is to try and close that gap a little bit.

Can we interpret what the regulators are requiring, what all the rules are requiring? And can we translate that into something that makes it super simple to comply with?

Not exactly a tick box, but certainly: “I have a query.” “Here’s what you need to do. Here’s the answer you need and the way you go.”At the moment, all of that is done manually, using consultants, lawyers, spreadsheets, writing hard code into your processes and systems. And the breaches are still occurring. This isn’t fundamentally solving the problem. The regulators are unhappy because their rules are not being complied with. The firms are unhappy because they don’t understand how to comply with the rules in all cases. The point of RegTech, I think, is to drive in, fill this gap and just make it much more efficient and accurate from both sides of the table there.

Bridging the gap between business and compliance

Malgorzata Labanowska: My understanding is that this is what you’re actually doing at Apiax as a RegTech company from Switzerland. Can you explain a bit further where Apiax is on the RegTech landscape? What is your strategy?

Alan Blanchard: RegTech is a massive spectrum of different activities and enterprises and what you’re doing. There’s a whole lifecycle for regulatory compliance, compliance management. And you see a lot, as you say, in the AML, KYC space, the client onboarding space, reporting to regulators.

But we’re not really in there. That’s an extremely well-populated part of the RegTech spectrum. We sit somewhere a little bit away from that side of things, at the delta between Legal and Compliance. The folk in-house or the external consultants who are doing all the interpretation, they’re trying to come up with this checkbox of requirements and crossing that gap to the business side. I’m conducting my business in an organisation. I’ve got a client, they’ve asked for a particular type of product. I need to understand if I can sell it to them or not, for example.

Apiax will bridge that gap and say, “You don’t need to talk to Legal and Compliance. You don’t need to raise a compliance process. You can self-serve your answer, and you can get that answer back to you straight away, and away you go. You can carry on doing your business.”

So the delta, as I say, between Legal and Compliance in the businesses is where we sit; a very much actionable, results-driven kind of RegTech.

The strategy, in effect, is to extend that across all financial services. At the moment, we’re working in asset management, investment management, but we want to go into retail, corporate, scale it all the way across financial services and then beyond. So you can go to any regulated industry. You can close that gap between anyone operating in a highly regulated environment.

This is why I think Apiax isn’t by any means a point solution, which we see with a few RegTech companies. They’re solving specific problems. We are solving this problem of compliance, ideally across the whole of industry.

How to navigate the constant changes in the legal environment?

Adam Pogorzelski: I have another question connected to this one, actually. It’s about maintaining the whole taxonomy, data models, processes in the context of the constantly changing legal environment. This environment is changing in many jurisdictions at the same time.

I’m wondering how Apiax is dealing with this specific challenge of changes. How do you maintain this whole taxonomy and data with the legal environment changing all the time? If it’s not confidential, obviously.

Alan Blanchard: (laughs) No, it’s not. We obviously do have an element of secret sauce, the whole thing. But here you’re correctly identifying a hugely complex area. The problem with laws is that they change all the time. And when you’re looking at laws all over the world, you’re adding to that complexity over and over again.

The way that this is dealt with at the moment is that each individual financial institution goes off to find a law firm or an advisory firm to give them the update, and they might do this once a year, once every two years, spending a fair amount of money across the board.

The way that we see this working is a once-and-for-many model rather than everyone doing the same job, duplicating that effort across all of these organisations. We are taking the legal content. We are taking that from top tier law firms, from advisory firms who are doing this work once, and then we collect that all together. They’ve done the interpretation so we can then do the digitisation of that. We have an in-house team of regulatory engineers who are pouring all of that content into our platform. We’ve done that for everyone, so then anyone who wants access to that content comes in, plugs into our rule sets, and then we can distribute that out to whatever channel the end user requires. You no longer have the effort of horizon scanning, regulatory change management, implementation.

It’s really just a plug and play. Here’s all the content you need in the format that you wish to take it. From a data point of view, that takes an awful lot of standardisation. We have to take all of these different content streams. We standardise it, and then we can allow for variances using a taxonomy so the taxonomy is covering the standardisation. But you as an individual firm, you’ll want your own particular aspects of how you’re going to manage and deploy that content, and you can use a taxonomy to be able to do that so we can start layering.

The complexity is reflected in the layers of content that’s involved. But once you’ve standardised it and you’ve got it on the platform, the maintenance of that should be fairly straightforward. You should just be able to say, well, this rule has changed in this jurisdiction. Therefore, we’re going to alter the digital version of that rule, and hey, presto, it’s done for everyone. We can get down to quite a granular level with this. But it is time consuming.

It’s taken us four years to get to four use cases for around 100 jurisdictions. We’re not going to take any shortcuts. We’re going to do it properly. There’s no AI, there’s no ML doing this. That is where the magic is.

The magic for us is in how when you ask your query, you configure your query. How does our technology give you the correct answer back? That’s where our secret sauce is.

Malgorzata Labanowska: The complexity of this regulatory challenge sounds overwhelming. How does change affect you on a personal level? What are your ways of keeping up to date with all the regulatory changes?

Alan Blanchard: We’ve covered that off a little bit in the last answer. We don’t do it ourselves. We use partners, and we’re developing this ecosystem to help manage that change. From a practical point of view, we understand it’s going to happen. It’s not going away. It’s probably going to get worse so we are positioning ourselves to be able to manage that in the most efficient way possible.

From a personal point of view, we’re all for it. If things stayed the same, we’d be out of a job, right? We need things to change. We need things to be complex. The more Brexits there are, the more differentiation and regulatory regimes there are, this is all good for us. It might not be the most efficient from a society point of view, but from our point of view, this is the challenge that we’re set up to do.

I’ve always taken quite a positive outlook on change. I think when you train as a lawyer, you’re told that law is dynamic and it’s always going to change. This is why you’re a valuable person, because you have the depth of expertise to be able to understand a particular legal scenario and its changes over time and always keep your advice up to date.

Then when we moved into the digital age, we were doing that with technology. There were different flavors of technology. There were static websites, dynamic websites. There’s API, there’s AI. This is always going to be moving forward.

We need to make sure we’re ingesting the content in the most efficient way possible, and then we’re outputting that using whatever technology that’s going to drive that.

At the moment, obviously, we’re API-based. But this is always going to change, and we’re always going to be ready to be able to make sure that we’re meeting that challenge.

The highlights of the current product development roadmap at Apiax

Adam Pogorzelski: Now, I would like to focus a bit on Apiax product development roadmap. As an IT consultancy, we build FinTech products and every single customer-facing application revealed there is a need for a solution for user onboarding or KYC, for example. As far as I know, your company is currently building such a product. Could you tell us a little more about it? How can FinTech companies use it? Which markets, countries, jurisdictions will it be compliant with, this kind of onboarding or KYC solution?

Alan Blanchard: We developed, as I said, four apps. The latest one is on client onboarding, and the use case driver here is: what do I do when I have a client with a hugely complex structure? This will be a variety of legal entities sitting in a variety of jurisdictions, and there will be a variety of requirements around the documentation. I need to be able to identify this client and then run my KYC and AML and due diligence.

At the moment that process is horrible. It’s backwards and forwards with the client, to the lawyer, to the in-house lawyer, maybe to an external lawyer. It’s slow. It’s not too bad in the retail space because usually it’s an individual person with a driving license or a passport or a bill or whatever it is, and the way they go, they can prove their identity.

When you’ve got a complex legal structure, like a trust or a particular type of corporate structure there, you’ve got to dig into that structure to be able to identify the different components of that and then the different legal entities and also the natural persons that sit under that.What our app is trying to do is help you through that process. We have configured it in a way where you can input the type of client you’ve got and then we will drill down through the different layers of complexity—whether that’s across the jurisdiction or a particular legal entity type—until you get to the point where you’ve identified all of the layers that sit under there, and then we will provide you with the regulatory requirements. These are the documents you need from that person, from the entity to be able to onboard them to go ahead.

We’re transforming a horrible process that takes days, weeks—it might not always be very successful—to something that is now only a few clicks, a few minutes’ worth of working through our app for you to be able to get to the answer.

Adam Pogorzelski: Are your specific products or components limited by the business’s location, or are you, as a company, more focused on, for example, UK-based companies or Switzerland-based companies? Or are there no limitations like this when it comes to using your solutions?

Alan Blanchard: We’re digitising the rules by jurisdiction, so it makes no difference whether you’re in the UK, Singapore, Switzerland, Brazil or wherever. If the rules are digitised for the location you’re in and the location you want to do business in, a presto, off you go. The only issue stopping us is that you might come to us with a particular structure where we don’t have the digital rules yet. So we would have to have a process of onboarding those rules.

But in theory, you can come from any country in the world to us and say, “I need the rules for X, Y and Z jurisdictions.” And here you are, there you go.

Adam Pogorzelski: The technology itself is ready, but it’s about the content.

Alan Blanchard: Yes, exactly.

Malgorzata Labanowska: What is the next big thing on your product roadmap that you can perhaps tell us about, something that, in your opinion, will be a significant value offering for your clients? Is there any specific technology-related innovation behind this product?

Alan Blanchard: We’re not really looking at it from a technology point of view, I think. We’re at the forefront of the way that we digitise the content and the way that we distribute that content through APIs at the moment. That’s best in class until you get something better than API coming along. That is where we’re going to sit.

For us, the development is in pouring that content onto the platform. How many digital rules do we have? How many jurisdictions do we have? And then growing that out across the different areas of compliance practice.

We’re definitely using the experience of the last year to drive that. A lot of people have realised that these manual compliance processes are no longer effective. So here we are. 

We’re able to build you a solution based on the particular use case that you’ve got available to you. We have some that are off-the-shelf, obviously, but then we’re going to have some that are driven by client demand to say, “Hey, we need an investment banking solution for mergers and acquisitions or whatever. Here’s the content, build that for…” We can do that.

And then I think we’re going to be looking at how we scale that. Once you’re in an organisation, how quickly can we digitise the whole of your compliance processes? That’s going to keep us very busy for the short to medium-term.

But then we are also looking at improving our partner network. Can we plug our rule sets into existing technologies? Can we build something that looks like a very nice end-to-end compliance solution as part of a chain of technologies and solutions there? Can we work with consultancies to design very bespoke pieces that meet the requirements of the biggest financial institutions and that sort of thing?

We are flexible enough to be used in so many different use cases and in so many different requirements that part of the issue is we need to stay focused on what we’re doing, what our core work is. And then we’ve got to time it right in terms of our expansion into other areas.

Malgorzata Labanowska: I’m really impressed. It sounds like you’ve mastered the art of making complex things simple. This is amazing, and we are looking forward to hearing about your new offerings.

Adam Pogorzelski: Thank you.

Alan Blanchard: Thanks so much for having us. It’s been a pleasure to speak to you, guys. Hopefully next time we’ll all be together in the same room.

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