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A Complete Process Automation Solution to Let Financial RegTechs Work Faster, Together

Kyle Thomas, Global Public Sector Industry Lead
December 12, 2022

The financial services industry is vast, complex, and almost infinite in its diversity. So, too, are the regulatory agencies overseeing this industry. For example, the US market's regulatory framework is incredibly complex: More than 50 state or local and more than a dozen federal agencies coexist to keep the financial services marketplace healthy, competitive, and safe for consumers.

The missions of the agencies overseeing the financial services industry vary as widely as the sector itself. But if you look closely, there is plenty of common ground that is ripe for a more coordinated supervisory solutions retooling.

Early inroads for inter-agency collaboration.

Some agencies are making good headway toward working together. Bank supervision, for example, is jointly conducted by both state and federal agencies, which often work together to supervise and monitor their institutions day to day. Similarly, state regulators are increasingly working across state lines and partnering with their peers to oversee the largest, most complex banks, mortgage firms, and money services companies.

Even when agencies work independently, there is an increasing need to share results and information with others. The risks of not sharing information cross-agency were highlighted during the financial crisis of 2008: Threats to the stability of the financial system went unrecognized until it was too late. Since then, significant progress has been made to break down barriers and share valuable information across agency lines.

The Financial Stability Oversight Council (FSOC), for instance, was born out of the crisis to foster greater collaboration and information sharing about the largest financial firms and systemic threats to the system. Meanwhile, constructs like the Federal Financial Institutions Examination Council (FFIEC) have been bringing agencies together to coordinate regulatory policy, data collection, and surveillance solutions for decades. It is time for technology modernization to follow suit through shared applications that can be tailored to each agency. Flexible, reusable, low-code process automation software makes it easy to do this at speed.

Collaborative application development: an essential component of digital transformation in RegTech.

Before cross-agency collaboration became a priority, most state and federal agencies developed their mission-critical technologies with a focus on their specific use cases. These custom-made solutions are outdated, disparate, and costly to maintain. As a result, many agencies are undergoing modernization efforts to re-platform their legacy solutions.

Many agencies believe they have only two options:  to rebuild a new custom solution from scratch—an approach which has already failed to keep up with their needs—or choose a generic, commercial off-the-shelf (COTS) solution. COTS solutions offer speed to market but are often not adaptable enough to handle the complex workflows and business processes of financial regulators. There’s a better way.

Process automation using low-code sits comfortably between the costly custom-build approach and the COTS approach, offering speed to market and the flexibility to build, reuse, and adapt solutions across different agencies and as new use cases arise. So, how can agencies take advantage of retooling their technology stack with low-code automation tools for inter-agency collaboration efforts?

Take, for example, the credit review function performed by most regulatory agencies. The basic workflow is nearly identical regardless of the agency, but the specific targets, procedures, and documentation captured vary. As such, it is a good use case for a build-and-adapt strategy, where a common workflow is built collaboratively and then adapted as needed. COTS solutions often promise similar adaptability but quickly become costly and inflexible, leading to solutions that can no longer be shared or must be so heavily customized that the result is essentially a custom-code solution.

And the credit review process is just one of many examples of how agencies can use a low-code automation platform. Most financial regulatory processes share enough common ground that it makes sense to develop the foundation of these solutions collectively. And the call for collaborative solution development becomes even more urgent when agencies share regulatory jurisdiction over a company, which is common.

Cooperative retooling of today's regulatory application solutions holds promise not only for regulatory agencies, but also for companies under their supervision. Since most financial service companies are subject to some combination of state and federal oversight, coordinated development and implementation lessens the burden on the industry user base in several ways:

  • It brings familiarity. Instead of multiple systems for multiple regulators, companies learn and use a single system. This is significant because companies often have more than one regulatory agency.
  • It drives consistency across regulators, which brings greater predictability for the company's decision-makers.
  • It maximizes government investment by allowing agencies to avoid developing duplicate solutions or databases.
  • It allows training and implementation resources to be shared, since there is a common interface across agencies, further reducing the cost of retooling.

How to create shared financial regulatory applications.

Attitudes are opening to explorating the ways collaborative application development can benefit financial regulatory agencies and the companies they oversee. Many agencies are beginning modernization efforts, and there are increasing demands by the industry to make the processes more efficient. You can quickly reach a state of shared financial regulatory solutions by following these three steps:

  1. Choose a platform suited to complex workflows, automation, and process adaptability, and integrate that platform across agencies.
  2. Assemble business owners and IT leaders from each agency to compare their near- and long-term modernization strategies and determine where the most fruitful opportunities exist for collaborative retooling.
  3. Assess the feasibility of a common data standard and mutually accessible data fabric for supervisory information. While not without risk, shared data accessible across agencies would transform supervision and make application development cooperative. One such application, the Federal Financial Institutions Examination Council's (FFIEC) Central Data Repository (CDR), which has been operational for over a decade, proves that coordinated development and data governance is possible.

If done right, collaborative retooling of the most critical supervisory systems could accelerate each agency's goal of reaching a modernized, tailored suite of mission-critical technology solutions. At the same time, it would preserve each agency's autonomy and mission. With most agencies embarking on ambitious modernization journeys, the time is right to explore how modern, low-code platforms can be leveraged to transform the business of financial supervision.

Federal, state, and local government agencies are using Appian’s low-code process automation software to develop applications faster. Appian excels at pulling data from multiple data sources and creating scalable, reusable, easily editable workflow components.

To learn more about how Appian is driving efficiencies at government agencies, download our eBook, The Secret to a Streamlined Government.