CUBE founder and CEO, Ben Richmond, recently joined Alyne CEO and founder, Karl Viertel, in The RegTech Report. The podcast focussed on how RegTech streamlines implementation and frees up precious resources for financial institutions. Below, Ben discusses the age-old question; should firms invest in RegTech from a third party such as CUBE, or are they better off making it themselves?
KV: The question we often hear is ‘make versus buy?’. I literally had a conversation with a customer once and they said ‘Well, I looked up what it costs to spin up an AWS based system and it’s only $15 a month – so your pricing should be $17 a month – correct?’. The ‘make v buy’ question is still a very interesting conversation in RegTech. What’s your experience?
BR: I think, first of all, generally speaking within the world of RegTech there seems to be an appreciation from the customer side that actually – why build it? Because their resources are spread very thin to be able to build and generally – certainly the customers we serve within the financial services industry – want to focus their resources on building new, innovative products that they can go to market with, that can generate revenue, more so than those back-end operational/infrastructure products. That actually is more where RegTech would fit within. I think, certainly in RegTech there’s less of a battle in that regard.
However, that’s not forgoing the fact that particularly the large Tier-1 firms are very complex in their systems and data and integration, so often there is some core system or application in the governance, risk and compliance environment that you need to integrate with. And that’s perfectly understandable and perfectly normal. But that isn’t really about making a decision on ‘well, do we build a solution that these RegTechs do?’ because, as I said, that argument is already quite well won.
I think it’s more about making sure that you can integrate your RegTech solutions in a way that sits within the firm’s infrastructure.
So that’s the first key thing, and the second is that – for the customer (and it’s difficult within RegTech to a point because the industry is still in its infancy) but for the customer it is about confidence and it’s about proving with the RegTech vendor or potential partner that they can indeed recognise the benefits. We have the benefit of maturity within our firm at CUBE – we’re 10 years in so that helps – and we’ve got a lot of traction. That helps a lot in our discussions, but where you don’t have that level of maturity, that ability to really partner with a customer and demonstrate really well how you can realise the concept and how you can realise the value that’s being proposed is super important.
And the final thing I’d say is that, in the world of RegTech – and particularly in what we do – it’s about reducing risk and reducing cost. Fundamentally that isn’t necessarily done by cutting heads to reduce costs, it’s about moving people up the value chain so that actually the jobs that aren’t getting done that really need to get done by humans – can get done because the machine is doing the heavy lifting elsewhere. And by moving up that value chain you do reduce risk because those jobs get done better and you reduce cost because you’re not layering in more and more people to get those jobs done.
So, I think that’s the other important factor – RegTech is there to do so much of the leg work and the tasks that can be machine automated, which enables people to really focus on how they get the real value-add stuff done.