As part of this fortnight’s regtech Focus, Holland FinTech spoke with Simon Wilkinson from Tradle.
Tradle is a London-based global KYC regtech company and a Holland FinTech member. Having had great success and global expansion in 2017, Tradle was chosen number one Blockchain Fintech in Europe at the European Fintech Awards this year and was also chosen as number one Fintech in Japan. Simon Wilkinson is Operations Director at Tradle. At Holland FinTech, we know that our members have a great wealth of knowledge. We want to share these insights to increase knowledge of regtech and showcase Tradle’s success.
Here is a summary of our interview.
We are currently running a regtech focus. How do you see regtech fitting into the fintech industry? What is your definition of regtech?
Fintech companies invariably need to comply with regulation. Regtech is an increasing necessity for development in fintech and broader financial industry. In particular, KYC regtech companies like Tradle use technology and digitisation to speed up on-boarding processes and increase identity protection. This is important for financial institutions where KYC can be 80% manual. Tradle is a platform for the financial industry that improves efficiency and minimises costs. KYC regtech companies like Tradle are important to guarantee security of data and privacy while meeting KYC and open banking requirements.
What do you see as the next step in regtech?
Probably digital regulation. AI and machine learning will permit regtech to both read and action regulation; meaning compliance is ‘on the fly’. ‘There will always be a mismatch between regulations in different jurisdictions so there needs to be an intermediary type of digital regulation to map multi-jurisdictional compliance. International KYC, which is what Tradle is interested in, shares KYC across borders. That has different implications in every jurisdiction. Tradle wants to help with the movement towards digitising regulations.
What role does the global move towards open banking have to play in the development of KYC?
Open banking needs digital KYC but it’s not going to drive KYC any faster. However, as there will be many fintechs wanting to be involved with PSD2 and open banking, there will be a greater need for KYC. The fintech companies won’t want to do traditional KYC, partly because they’re not geared up for it. They will want to have a digital solution like Tradle. So, there will be a massive growth in the need for digital KYC. This will eventually contract as digital KYC becomes commonplace and the market for KYC will eventually settle down, I think.
Tradle was part of the UK FCA Sandbox which turned London into a regtech hub. How was this experience? How did the FCA Sandbox help establish this?
[The Sandbox experience] was very good. The FCA invited Tradle, they were interested in our development of a mobile experience of KYC. They were particularly keen on KYC. Tradle was one of the first regtech companies to use blockchain in any real, live way. We had a live product which used blockchain. Also, we’ve pioneered the sharing of KYC where you and I own our KYC, not the bank. [The FCA] was really keen for us to be part of the Sandbox.
It was a great growing exercise. We are a start up and so we had to assure the FCA that we were going to act as a responsible fintech. The FCA was very keen to make sure that we were extremely focused on the security of customers’ and business data.
Once we were in the Sandbox, we went in with Aviva to onboard their pensions customers. We went through a second vetting process with them because we had to satisfy their compliance and risk teams that we should be able to touch their customer data – the most critical piece for the business.
What was especially good about the FCA’s Sandbox, was that startups didn’t need to be regulated. In many other countries where they are building these sandboxes, the regulators are only interested in fintechs who are required to be regulated. This is a lot of work for a fintech or a startup to go through the regulated process anyway, and in Tradle’s case, the regulation process was unnecessary because Tradle doesn’t store customer data.
The Sandbox was also a great exercise for the FCA to better understand the new technologies coming though. Understanding new ways of doing things is necessary for the future of regulation; i.e., the move towards digital regulation.’ This is an aspect or regtech which promotes collaboration between every aspect of the market; financial institutions, fintechs and regulators themselves can all learn from regtech.
From your point of view, what does London’s regtech landscape look like?
The London regtech landscape still has a lot of potential growth because today we just think of regtech as for the financial sector, but it needs to be extended to encompass healthcare, utilities, telecoms companies, because all of these businesses touch personal customer information. Especially with the GDPR coming into force in May 2018, there needs to be greater focus on giving back ownership of data to the owner.
Also, the GDPR will mean that we need to change the models. The [centralised] models like Equifax will always be a target for hackers. With PSD2 and open banking there will be even more opportunity for corruption and theft of personal data. So, Tradle is a great advocate for giving back ownership of personal data to the owner, whether that owner is an individual or a corporate.
Regtech is not only for finance, but for ‘every vertical.’ ‘We see that the regulators could step in and create more enforcement and guidelines for regtech across many industries.’
Tradle recently won first prize at Japan’s Fintech Summit 2017. Regtech in Asia has been reported as less developed than in Europe (see our Regtech Essentials). What is Tradle’s involvement in the Japanese and Asian markets? What opportunities for future growth of regtech do you see, including growth in Asia or other opportunities?
We were very proud this year to be awarded number one blockchain fintech in Europe 2017 and number one fintech at Japan’s Fintech Summit 2017.
The Asian regtech market is more structured and more focused on having regulated startups in their sandboxes. This can limit innovation as regulatory costs can inhibit startups. The FCA’s sandbox in London showed how allowing unregulated startups to participate encourages greater innovation.
Having said that, Tradle has a number of projects with Asian banks and insurance companies. Tradle has deep relationships with 21 regulators around the world because making KYC portable needs the involvement of regulators in every nation.
Tradle’s projects are in private banking, sharing KYC across a network of private banks. Especially noteworthy was out project in Switzerland that is more expanding to a network of private banks. Similarly, in corporate banking we are building a network to share KYC between European and Asian banks.
We are currently preparing production of our product for New Zealand. In New Zealand, the regulators will in 2018 implement Phase two of the NZ AML/CFT regulation. This will require accountants, banks, law firms rental companies, wills, trust and equity businesses, anything that involves potential money laundering, to KYC their customers. That’s about 7000 business in New Zealand that will have to change their practices to meet the next phase of KYC regulation. We have just started in New Zealand with Perpetual Guardian, a wills and trusts company. We will then move rapidly on to use our shared platform for law firms and banks in New Zealand.’ The big four banks in New Zealand are all owned by the big four banks in Australia, potentially giving Tradle an entry to Australia in the future.
Could you please explain the more technical aspects of how Tradle’s technology works?
We don’t centralise data and we’re not a data company. We think that data should only be owned and controlled by the data subject and sent to the bank. We use the next generation of the cloud called Serverless, which allows the bank to launch their own Tradle service in their cloud, with their own data keys. This means that Tradle doesn’t have access to the data. This suits us perfectly: if we don’t have any access data, we’re not subjected to compliance, security and risk vetting from banks or insurances companies.
Tradle uses multiple blockchains; we are agnostic to blockchain. Today we use ethereum and bitcoin. When a customer is KYC-ed with a bank or insurance company through our mobile chat app – resembling Whatsapp but with forms – the customer subject’s data is sent to the bank through the app’s chat interface. Whether the data is a passport, address, invoice or company certificate, when the bank verifies the information, a seal of that verification goes on the blockchain. There is no data and nothing identifiable, but the owner of that data can see the verification seal in their mobile app by looking at the blockchain.
By Grace Appleford, Research Analyst at Holland FinTech.]]>