If startups had invented data compliance…


Anastasia Dokuchaeva, head of partnerships at ClauseMatch, considers what data compliance would look like if a startup invented it.

Legacy financial institutions large and small have a dirty secret regarding their data. The problem they have is this: only 10% of the data flowing through their organisations can be described as ‘structured’.

Structured information and data can be interrogated and made valuable. Ask it questions and it will show you solutions.

But how do you make the decisions you need to in order to run a successful business when 90% of the information you own is unstructured? When it’s all over the place and stored in hundreds of different formats?

How can a CEO and a board be accountable for what is happening within their companies if they can’t access the data that will tell them what is going on?

But there’s another problem. When we speak to executives from legacy financial organisations we see that the appetite to figure out how this data imbalance can be resolved is scarce. For many it is simply a case of a lack of belief that an alternative way exists. Also, fixing it would be a huge, long-term and laborious job for someone, right?

Recently however, I saw something that changed my mind and gave me hope.

I travel a lot and attend many events. For a regtech startup like us, it’s a way to speak to big banks about a new way of thinking and operating with regard to their data. Normally you have to work very hard to get these people to talk to you.

You would think a conference is a good environment to have open conversations that expose people to new ideas and solutions. Yet I’m regularly struck by how much effort attendees and speakers alike go to in order to avoid conversations where they might be sold to, or actually – god forbid – learn something valuable.

I was at a conference in Washington DC, in a room of about 300 people. An executive from one of the most prestigious financial institutions in the US spoke on a panel. As he left the stage after his session he took the time to go and speak to each vendor that was manning a booth around the edge of the hall.

I watched as he gave every one of them a full 15 minutes of listening and asking questions. He had dedicated the time to learn about new stuff in his industry. He didn’t go to the next session because he spent an hour and a half meticulously visiting every single vendor.

Of all the people in the hall he was alone in doing this. I caught him on his way out and as soon as he realised I was from a regtech startup, he began to ask me the same questions he’d asked others and he listened. He took notes and wanted to understand what was possible with new technology platforms and partners that might help him.

This elderly gent is ‘head of transformation’ for his company, a job he’s had for two years. It’s taken him two years to get the buy in – not even the budget but the belief – of his senior management to give him the go ahead to execute on his vision.

Now he had that buy-in he was looking for help. He’d spent ‘phase 1’ of his plan getting a grip on all of the data in the organisation, regardless of where it sits – documenting where and what it is – before creating a library.

‘Phase 2’ was understanding how to change the way the company treats its documents, its policies and its standards. Policy management and governance is a major operation that underpins a successful business and is for most, part of the 90% unstructured data. This means extracting anything useful from it is almost impossible.

Now, with the appetite of a man with his first job, this man is attacking all the data across an enormous organisation and trying to make it useful.

It occurs to me though that a better way to deal with data is by replicating the ease in which startups handle their data.

Startups are not just product companies but data companies; this makes them insight and knowledge companies.

Vendors selling to enterprise companies in data management and regtech often tell them that they have to get a grip on the unstructured 90% data – this isn’t correct. Today, we capture tonnes of unstructured information almost as a bi-product of everything else we do. But do we really need all of this information to make decisions? How much is relevant?

The FinTech companies that are growing so fast haven’t spent years capturing tonnes of irrelevant noise and therefore don’t waste time trying to figure out what to do with it. They’re smart and selective with the data they invest in.

They therefore have beautiful clean data sets and don’t get bogged down by noise. So when it comes to the major piece of organisational operations that is governance and conduct, they are leaner, more efficient and avoid having to hire armies of compliance officers.

If I think about the question of what compliance would look like if startups had invented it, my answer is that startups are inventing compliance. What it looks like, without decades of legacy noise, is quick, effective, unhindered by countless unconnected documents. Smooth processes are built around clean, comprehensive, accurate and granular data sets giving risk officers or policy managers exactly what they need to know in real-time.

Financial institutions are speaking at conferences saying: “We have all this data, and we’re exploring artificial intelligence solutions to help us experiment with various chunks of our data that may make us more productive and competitive.” But why are they wasting time experimenting with the ‘noise’; the data that isn’t directly relevant?

Startups don’t have to spend time exploring data they know is without value because they’ve already figured out that smaller and more structured data sets drive success. It may take a generation for such a strategy to be widely adopted by the mainstream but sooner or later, we’ll all learn that how we collect and select the data we use will create faster, better and more sustainable businesses.

What do you think compliance teams would look like if startups had invented them? You can let Anastasia know on Stand B13 at Fintech Connect tomorrow or Thursday.