APIs and the Future of Digital Compliance

We live in a digital age where the scope of technology now at our disposal would have been too unfathomable for most people to comprehend just 20 years ago. In parallel to this rapidly unfurling technological revolution, people have become more demanding; everything must be available on-demand and delivered as seamlessly as possible.



We can see these rapid developments in the advent of self-driving cars, Amazon’s transition from bookseller to global superpower, the sudden ubiquity of FinTech, and in the way more and more of our daily interactions are being streamlined and digitalised.


Expectations on the speed of interactions and service levels are higher than ever before, but in industries where regulations and compliance are stubborn and necessary roadblocks on the highway of right now, adapting and streamlining business methods and protocols is a complex endeavour. This is particularly true for the financial industry, where the implications of the global financial crisis have led to an increase in the laws and regulations imposed by governments and financial regulators in the last decade.


Of course, regulatory watchdogs play a key and necessary role. The problem for finance professionals is that as new and updated regulations are applied to keep up with the rapidly changing times, knowing exactly which service can be offered and under what circumstances is essentially a full-time job in itself.


In a recently released report, LexisNexis Risk Solutions estimated that global financial services companies spent $180.9 billion on financial compliance in 2020. In spite of so much time and money being dedicated to compliance, a further $10.4 billion was levied in fines and penalties in 2020.




The API solution


APIs play a critical role in the rapid information age in which we live today. From checking the weather to making a hotel booking, APIs play some part in the processing of almost all online requests. APIs are so significant that they could be considered the glue that is holding together the very structure of today’s interconnected digital society.


In the world of financial compliance, where many people still rely on phone calls, emails, or a database search to find a particular piece of crucial information, the introduction of APIs to this process has the potential to revolutionise the entire system. By introducing an API, the need to manually search out critical regulatory information is replaced by the opportunity to access that same information instantly by simply inputting the raw data most pertinent to a specific query.


APIs have already been adopted on a large scale in the financial industry thanks to the rise of open banking and the inexorable shift to digitalisation, but until now their uptake has been relatively less widespread when it comes to compliance. It is perhaps the sheer vastness and complexity of this field that has held back widespread adoption, plus the fact that in compliance, the margin of error that can be allowed in other fields is simply non-existent.


The introduction of APIs into the financial compliance sector is being led by companies specialising in what is known as RegTech (Regulatory Technology). Still a somewhat fledgeling industry, we can track the financial services providers’ growing appetite for RegTech and the introduction of APIs into the world of compliance in the figures that show how investment in RegTech has jumped from $1 billion in 2015 to $8.5 billion in 2019.




RegTech and Cross Border Compliance


The scope and size of regulatory compliance in domestic financial transactions is vast. When approached from a cross-border perspective, the totality of all the rules and regulations that must be applied domestically are potentially at play simultaneously in cross-border interactions. The sheer number of cross-border and product suitability rules is enormous, but this also makes this field an ideal one for the introduction of RegTech and APIs.


Financial companies that are not fully prepared to manage cross-border compliance face regulatory and financial risks if cross-border and product suitability rules are not closely followed. Adhering to these stringent rules is both time-consuming and expensive from an operational perspective.


API solutions eradicate many of the problems banks and other financial services providers can face when dealing with cross-border compliance. APIs deliver flawless compliance and they are designed to easily integrate into existing core baking systems, CRM applications, and other digital platforms. By employing API solutions, financial services providers can deliver automated cross-border controls across any phase of client life cycle management with complete peace of mind.



API solutions for cross-border compliance are able to map out the journey the financial service provider and a potential client can follow. The API confirms whether or not the client's onboarding is compliant based on his or her location. If so, it then determines the kind of message and channel that must be adhered to with reference to the applicable cross-border rule. And the system also notifies the financial provider as to whether travel authorisation can be given to a relationship manager who wishes to meet a client or prospect abroad.


APIs operate in a fluid, continually updating manner to ensure that flawless compliance is adhered to at all times and under all circumstances. The best of these systems are also able to run complete suitability checks for all financial products. Financial service providers need only input the respective ISIN code to check whether an investment is compliant, suitable from an investment prospective, see its tax implications, and obtain all relevant regulatory paperwork.



A Compliant Digital Future


The technological age is enabling rapid societal advances never before seen in the history of humankind. As money, whether in hard cash or its digital form, will continue to make this modern world go around, it is time for the world of financial compliance to take more confident steps into the world of digitalisation.


The advantages for the industry of adopting RegTech are manifold. This is particularly true for the highly complex world of cross-border compliance, where so much time and money is currently devoted to operational practices that could be significantly streamlined and improved with the introduction of APIs.


Thanks to the trustworthy API digital solutions that have been specifically tailored to meet the exacting demands of cross-border compliance, financial services providers now have the perfect opportunity to transition the currently costly and time-consuming world of compliance into the digital age. In the same way that we give almost no second thought to the way modern technology has completely revolutionised our access to services and information, APIs have the capacity to redefine the industry by transforming the most complex compliance scenarios into automated tasks that can be actioned in just a few clicks.


In an age where the speed of change and ever greater innovation shows no signs of slowing down, RegTech enables financial services providers to deliver flawless, digital-first compliance strategies. Those companies that fail to adapt to the changing times run the risk of being left behind by their competitors. Whereas the banks and financial institutions that embrace this opportunity will be those most likely to shape and define the industry's new digital future.



In Conclusion


APIs are an intrinsic facet of today’s society that can now deliver modern, flawless compliance solutions to the financial services industry. These solutions have the potential to transform outdated ways of working and usher in a digital age in compliance. By greatly reducing the risk of human error, cutting costs, and slashing compliance dedicated person-hours, the shift to a digital API approach allows financial services providers to focus on providing faster and better service levels to their clients.



If you would like to learn more about how the Indigita API addresses the topics discussed here, please contact us at info@indigita.ch or by telephone at +41 44 552 59 40.



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