Regulation is NOT an excuse

Yesterday I had an encounter with a Singaporean bank that highlighted the deep cultural challenges that incumbent banks face in the era of digital disruption. At the core of the issue is the 'blame' culture. We've all seen it before, when someone blames another individual or organization as a way to veer from accountability. In the banking sector, the regulator is often the scapegoat for lack of progress, or failed innovation efforts. During my visit to that bank, I won't let that be the end of the story. I had a transaction that required a 'proof of address'. Inconvenient that may seem for a customer, I just brushed it off. I offered to just email my American Express statement. I was informed that the proof must be on paper. So I suggested to email my American Express statement to the branch staff so it could be printed at the printer on the counter. I was shocked when I was told the bank's email and printers are for 'internal use only' and that regulations prevent employees from accepting my documents electronically. Alarm bells went off in my head.

I don't think the branch was ready for someone who has worked on KYC (Know Your Customer) frameworks in over a dozen countries, with particular knowledge of the updates made by Singapore Authority, the Monetary Authority of Singapore(MAS).

Good innovators are always curious and always ask'Why?' when faced with something that doesn't make sense. Fueled by natural curiosity and investigation, I chose to dig deeper into the statement of the branch staff. Even after hinting at some of my knowledge in the space, she is firm to her answer, affirming that the bank only accepts paper documents for identity and authentication, siting MAS regulation as the justification. Realizing I was getting nowhere, I walked to the hotel next door, printed the statements and returned with the documents to complete the transaction. Posting my frustration on Facebook, many individuals responded that they can relate to what happened.


Too often, with my work in the financial services sector, I hear similar sentiments as they point the finger at existing regulations as  excuse for inferior execution. It's also common that most startup founders in Fintech are ex-bankers, seeking solutions to solve problems they've known for years while working in the sector. So why do good ideas walk out the door? It's simple. If you have the drive to solve the problem, one can only tolerate so many road blocks. Even Moven were frustrated to get banks to solve a known problem of debt and fee dependency. While regulation does at times have an impact, the majority of road blocks are internal rules implemented nearly 20 years ago.

Regulation has been the safety net for many industries, but regulators are rarely the reason for preventing improvement or innovation. The same applies with what happened to me with this bank. My Facebook followers advised and quickly confirmed, the MAS has no such rule.

For a financial institution to be a responsible contributor to the sector, they must actively participate in the industry's advancement, and not point excuses at the sectors rule maker. Many forget that regulators in most countries are responsive and engaging bodies that aim to manage the ambitions and risks of various sector. So if the sector collectively desires improvement, its regulator will ensure it does what's necessary to see that will happen in a safe manner.

When I was working in the mobile money space, we would often meet with regulators seeking guidance on ensuring the advancement of mobile money in their country. Often these regulators were faced with 'approval' requests, but with limited information available,they would seek advice on how to progress things. Similarly, MAS made recent improvements to KYC regulation, embracing digital friendly principles for KYC.

The financial institutions need to stop blaming the regulator and start being an active contributor to the advancement of their sector, otherwise face huge disruptive threats. Time and time again, I've talked to banks through known threats that would alter their core purpose in society, only to have them immediately say 'we can't do that because of the regulator'. It's a disappointing perspective to take, and one that will undermine the success on Fintech startups.

Later this year, the MAS is hosting Fintech Festival Singapore  as they continue to show their leadership. Let's just hope the banks catch up to the regulator ;)

In the comments below, share with me areas you think need improvement in your sector, and how the regulator is helping or hindering the business' progress.