Regtech NZ co-founder and consultant Janet Chenery has revealed the peak body’s plans to develop an accreditation scheme for regulatory technology (regtech) vendors that would not only help financial services firms vet regtech developers but also encourage the growth of the country’s burgeoning regtech industry.
Speaking at FST’s Future of Financial Services, New Zealand 2023, Chenery said the move would ultimately serve to increase financial services firms’ trust in regulatory technology suppliers and ensure that small “smaller regtechs are [invited] on board” to partner.
She said the peak body’s innovation pillar is also looking to build out an ‘innovation hub’ and a regulatory sandbox to support the local industry’s growth, particularly for smaller players challenged by dominant heavy hitters from overseas.
“Those small regtechs that have been operating for fewer than five years are part of an industry that is worth billions and growing every day,” she said.
“We can’t look past those small regtechs to the bigger companies just for security. [NZ’s financial services industry] has to look at what we can afford, what’s the right size for [their] business.”
The proposed accreditation scheme would, she said, help to encourage the growth of New Zealand’s emerging domestic regtech industry, with Chenery calling for rapid development of the sector – a sector, she noted, that is currently limited to only a handful of players.
Regtech NZ, she confirmed, counts between 10 and 15 registered members.
By comparison, its Australian counterpart, The Regtech Association Australia has around 115 members.
“Proportionally, that might seem okay,” she said, “but when considering that the legislation we’re dealing with is the same regardless of country and the scale of the legislation, and the legislation we have to deal with from overseas, proportional size doesn’t really matter.”
Chenery warned that the risk of not building out the regtech industry and bolstering regulatory support would see an increase in cyber threats actors targeting New Zealand’s financial services businesses.
“If the rest of the world are tightening up their AML [anti-money laundering] and KYC [Know Your Customer] controls and we’re seen to be weak, we’re opening ourselves up.”
Whilst acknowledging that New Zealand does have some innovative regtech solutions in market – naming Cloudcheck and AML Hub, among others – NZ’s regulated entities “aren’t always using them”, she said, too often relying on antiquated technologies like “spreadsheets”.
Chenery also flagged concerns around the potential insularity of the local regtech sector.
“We’re at risk of becoming our own vacuum. We’re talking, but we’re not doing. We need different perspectives.
“We need different ways of looking at our challenges; they’re not unique. We need to get off the islands, we need to travel, we need to go into the rooms, to see and feel the vibe of innovation and to smell success so that we can reignite our creativity and solutioning back here.”
Chenery called on the local financial services sector to get involved in its innovation program, particularly in building out its innovation hub and regulatory sandbox.
“We want you involved in that. We want the regulators involved in that. We want everyone involved in that.”
She added: “We’re also looking at individual developments as well. How do we know that the vendor solution, that was a small regtech, that was built out of the viaduct, is going to support your business?”