REGTECH STUDY - aec-fintechaec-fintech.com/wp-content/uploads/2018/...aec-fintech-study-sept20… · REGTECH STUDY European Landscape. SEPTEMBER 2018 . Fintech. Pantone 1797 / c2-m98-j85-n7

REGTECH STUDYEuropean Landscape S E P T E M B E R 2 0 1 8

FintechPantone 1797 / c2-m98-j85-n7Pantone 433 / c84-m69-j55-n70 Follow us on LinkedIn and Twitter @SiaPartnersFollow us on LinkedIn and Twitter @aec-fintech

For more information on Sia Partners: www.sia-partners.comFor more information on AEC: www.aec-fintech.com

@aec-fintech

@SiaPartners

s i a - p a r t n e r s . c o m • a e c - f i n t e c h . c o m

3

SUMMARY

01

02

03

17

20

21

Introduction & Methodology

Challenges for the Banking Sector

The European Regtech market landscape

Fundraising and M&A in Regtech

Conclusion

Appendix

PIERRE CHLABOVITCH Senior Analyst - AEC Fintech

THOMAS HELBECQUE Consultant Banking - Sia Partners

FRANÇOIS BERTELOOT Manager Banking - Sia Partners

SERGIO MATOS LIMA Senior Consultant Banking -

Sia Partners

Editorial Committee

1

INTRODUCTION Regtech in financial services – a combination of Regulation and Technology used to describe the application of new technologies to the world of regulation and compliance – has emerged as a sub-sector of the technology industry in the last three years. This was fostered by the parallel development of Big Data analytics and Artificial Intelligence which found a natural application given the vast amounts of data produced by banks.

With its mature and prominent financial services industry and strict regulatory regime, Europe has laid the foundations for many highly innovative companies seeking to exploit the latest advances in technology to help banks solve their regulatory challenges.

Whilst Regtech companies are increasingly coming under the radar of financial institutions and investors alike, relatively few studies have been dedicated to this nascent sector. This paper aims to fill this gap by taking a closer look at the various players that make up the European Regtech ecosystem and how they position themselves to tackle the regulatory needs of banks.

Sia Partners and AEC Fintech benchmarked 80 European Regtech companies with a view to uncover the trends that are driving these companies.

The purpose of this study is to provide an in-depth analysis of the European Regtech sector and give a comprehensive overview of emerging business ini-tiatives that leverage new technologies to help banks cope with their regulatory obligations.

THOMAS ROCAFULL

Partner Banking Sia Partners

ADRIEN CHOQUET

Associate Director AEC Fintech

Sia Partners and AEC Fintech have analysed some of the most successful Regtech companies in Europe and gained a better understanding of their business model, the types of technological innovation they are building on and the different services they can offer their banking customers.

The study is based on public information that was available on corporate websites in 2017 as well on interviews that were conducted with Regtech companies identified as leaders in their fields.

To support this study, 6 leading European Regtech companies were hand-picked to feature in the form of a case study, based on interviews with managers of these com-panies conducted between September 2017 and April 2018, and to illustrate use cases of new technologies in financial regulations.

Methodology

2

Challenges for the Banking Sector

European banks are operating in a highly regulated environment and are faced with many challenges:

• An important flow of new or revised regulations puts them under pressure to produce more data for supervisory authorities;

• High regulatory costs and lower levels of profitability makes it difficult for them to allocate enough resources to innovation and upgrading their legacy IT systems;

• Strict deadlines are leading to tacti-cal regulatory compliance responses rather than strategic ones;

• The nature of Banks’ siloed systems is complicating the application of data management, extraction and reporting to regulators;

• Finally, most banks’ current IT sof-tware is increasingly less able to cope with evolving regulatory expectations.

Faced with the need to proactively res-pond to an ever-increasing amount of compliance requests by regulators (both in terms of KYC and AML issues and the compliance with regulations that affect all business lines and support functions), banking groups are closely monitoring the emergence of Regtech companies and scouting for new technologies that can help them improve automation, reliability, control, transparency and communication with regulators.

3

Understanding the business needsThe 80 European Regtech companies in this study were divided in eight subcate-gories corresponding to the regulatory and compliance issues they focus on, namely :• Identity Management & Control, • Regulatory Reporting, • Risk-Data Management, • Transaction Monitoring, • Compliance Management, • Communication Monitoring, • Market Surveillance and Controls

Automation.The study focused on the first five cate-gories.

0 1a 1bdebout

1bcouché

2a 2bdebout

2bcouché

3a 3bdebout

3bcouché

4a 4bdebout

4bcouché

5a 5bdebout

5bcouché

6a 6bdebout

TransactionMonitoring11.1%

Risk-DataManagement13.6%

RegulatoryReporting27.2%

MarketSurveillance6.2%

IdentityManagement&Control27.2%

ControlsAutomation3.7%

ComplianceManagement4.9%

CommunicationMonitoring6.2%

Breakdown of European Regtech companies by subcategory

The European Regtech market landscape

27% of European Regtech companies are focused on solving Identity Management & Control issues

4

Technologies used for Identify Management and Control Regtechs1. Seamless and real-time Identity Management and Control:

Of the 80 Regtech companies we studied, the most common regulatory category tackled was Identity Management and Control (27.2% of Regtech companies in our study) — typically front to back-office administrative and compliance activities related to authentication and onboar-ding of new customers.vUse cases and business benefits of their solutions for banks include:

• Identify behavioural biometric pro-files of online users to recognise a wide range of human and non-human threats ranging from cybersecurity breaches to fraud;

• Create synergies through a shared blockchain database of KYC informa-tion among the various subsidiaries of a single bank;

• Automate KYC / AML checks by im-plementing APIs to connect law en-forcement agencies databases with customer databases.

0 1a 1bdebout

1bcouché

2a 2bdebout

2bcouché

3a 3bdebout

3bcouché

4a 4bdebout

4bcouché

5a 5bdebout

5bcouché

6a 6bdebout

ERP/Software/WebPlatform

7.7%Cloud7.7%

Blockchain7.7%

BigData15.4%

API26.9%

AI/RPA3.8%

AI/NLP3.8%

AI/MachineLearning26.9%

5

Improving KYC processes is a key challenge to all lines of businesses and IT teams within the financial services indus-try. Depending on the size of the financial institution in question, the cost of KYC ranges from €200m up to €1bn annually, 70% of which is spent on repetitive work done by employees. We estimate that Re-gtech companies can help financial insti-tutions slash the total cost of KYC by up to 30%.

34,6%of Regtech companies tackling challenges related to Identity Management and Control rely on AI-based solutions

Breakdown of Identify Management and Control Regtechs by main target customers

Regtech Interview - KYC3

“We used to spend hours using search engines to review potential clients and sometimes used costly background screening companies. Now, thanks to Big Data and API technology, we can manage the KYC and client onboarding process quickly, with an audit trail, and the whole subscription costs less than we used to pay for a single report”

– Chris Marcilla, Deputy Director KYC 3

• Created in 2013, KYC3.com delivers reporting and research solutions for professionals looking to mitigate risk through the use of data mining and analysis of unstructured Big Data.

• It offers inexpensive subscription access to a full feature of KYC screening and research facility offering unlimited KYC/AML screening audit reports and access to all research data, updated continually in real time.

• It also offers OEM and enterprise solutions for customers with specific requirements.

6

2. Helping banks meet their regulatory reporting obligations

The other most common type of Regtech (tied with Identify Management & Control) in our study focused on the Regulatory Re-porting needs of financial institutions (27.2% of companies). Most solutions in this space have turned to Cloud technologies (35.5%) and APIs (19.4%) to facilitate regulatory re-porting, with nearly half of them focusing on Asset Management clients. These Cloud and API applications can be used to

• automate the production of regulatory reports with an end-to-end solution;

• support and standardise cross-border distribution of investment funds; and

• enable regulatory authorities to super-vise financial companies with a web-based data submission portal and real-time validation.

The typical European Tier One bank must re-port to several regulators, from supranational to local supervisors, on a monthly, quarterly and/or annual basis. MIFID, FATCA, COREP, FINREP are but a mere sample of regulations that require banks to report on their transac-tions, their clients’ fiscal information and their risk & financial results.

Technologies used by regulatory reporting Regtechs

0 1a 1bdebout

1bcouché

2a 2bdebout

2bcouché

3a 3bdebout

3bcouché

4a 4bdebout

4bcouché

5a 5bdebout

5bcouché

6a 6bdebout

ERP/Software/WebPlatform12.9

Cloud35.5

BigData12.9

API19.4

AI/NLP3.2

AI/MachineLearning16.1

46.7%

of Regtech companies in the Regulatory Reporting category focused on Asset Management customers

Breakdown of Regulatory Reporting Regtechs by target client

Regtech Interview - Neuroprofiler

“Specifically, we offer a serious game allowing financial advisors to develop a scientifically robust risk profile of their customers, while offering an engaging user experience, and in compliance with the financial regulations in force, including MiFID 2. My associate, Julien Revelle, brought his expertise in Machine Learning to make the algorithm self-learning. This makes it possible to constantly improve the predictive power of the risk profiles.”

– Tiphaine Saltini, CEO of Neuroprofiler

• Using advances in behavioural finance and Machine Learning, Neuroprofiler offers a scientific, compliant and user-friendly solution to the MiFID II Client Suitability Assessment (CSA) requirement;

• MiFID II requires financial advisors providing investment advice and portfolio management services to have a detailed understan-ding of their clients’ risk profiles to ensure recommended financial products are suitable;

• The solution is offered as a SaaS platform and an API to cater to both independent financial advisors and larger retail and private banks; and• Machine Learning application leads to an ever-greater predictive power of the risk profiles.

7

0 1a 1bdebout

1bcouché

2a 2bdebout

2bcouché

3a 3bdebout

3bcouché

4a 4bdebout

4bcouché

5a 5bdebout

5bcouché

6a 6bdebout

Other6.7


Cloud13.3

BigData46.7

AI/RPA6.7


3. A better management of financial institutions’ risk data:

Regtech companies focusing on new ways of performing Risk Data Management (RDM) were the third most common cate-gory, accounting for 13.6% share of the studied sample. Almost half of the RDM Regtechs tend to rely on Big Data solutions and mostly target Corporate & Investment Banking clients. Their services intend to transform the value-chain of risk data management with the typical technology stacks. Solutions include:

• a break of the traditional vendor sales cycle with front-to-end stan-dards-based APIs, open documenta-tion and open-source software deve-lopment kits;

• extracting risk intelligence directly from all regulatory notices and en-forcement actions, then categorising them for global comparison to make the data relevant to any financial ins-titution; and

• using innovative algorithm-driven solutions to fulfil Accounting requi-rements (e.g. IFRS 9) and Regulatory (e.g. Basel 3) requirements.

Regulations such as BCBS239 (Principles for Effective Risk Data Aggregation and Risk Reporting) put risk data management and aggregation at the heart of financial institutions’ reporting requirements. Risk Data Management involves aspects of

46.7%

of Regtechs in the Risk Data Management category rely on Big Data

data governance, data monitoring and data protection needed to be centralised by one supervisory body connecting with many business functions. We estimate that the average budget required to implement qua-lity standards on risk data management for a Tier One bank to be around €200m.

Technology used by risk data management Regtechs

Client breakdown for risk data management Regtechs

Regtech Interview - Scaled risk

“[…] Scaled Risk’s product strategy is to offer a platform that centralises, organizes and provide a full audit trail for risk-relevant enterprise data (transactions, financial products, customers). The data is cap-tured "as is" with no upward processing, allowing risk & compliance staff to easily access and manage raw data without (i) impacting the source and (i) having to ask IT. Built-in analytics and version-control modules allow risk & compliance to quickly address ever-changing regulatory requirements (ratings, reporting and reviews) without having to wait for lengthy IT projects.”

– Bertrand Tillay-Doledec, Head of Product Management Scaled Risk

• Scaled Risk was created in 2012 by two ex-Thomson Reuters’ employees. The company’s mission is allow financial firms to over-come the analytics & reporting challenges brought by today’s new regulations with flexible & accountable data technologies

• Today, Scaled Risk is a Regtech software company providing the Financial Services Industry with a single, flexible and auditable platform to address key reporting & analytics needs of capital markets, asset management and retail banking firms

• The product works like an “off-the-shelf” data lake: it captures the enterprise’s siloed data within a single repository, handles in-dexing & documentation automatically, to let the user build purpose-specific data views & analytics while recording all actions in order to provide a full audit trail.

• A key differentiating feature is that the platform allows to capture data updates (like transactions, products or customer characte-ristics) without overwriting old versions and to organize them with a comprehensive time consistency approach that embrace both system and functional times. This provides a “time-machine” view on data which is key for reports & audits.

8

9

1bdebout

1bcouché

2a 2bdebout

2bcouché

3a 3bdebout

3bcouché

4a 4bdebout

4bcouché

5a 5bdebout

5bcouché

6a 6bdebout

6bcouché

7a 7b

ran actionMonitoring

0

10

20

30

40

50

60

70

80

90

100

oR

egTe

chcom

anie

sor

he

cla

ssi

caio

nbu

sine

ssu

ni

9.1AllLoB Support unction

27.3A etManagement

27.3Retailbanking

27.3Other

9.1CIB

Client breakdown for transaction monitoring Regtechs

36.4% of Regtechs in the Transaction Monitoring category are using Blockchain technology to serve their customers

4. Keep a close cognitive eye on your transactions:

The fourth most common type of Reg-tech in our study (11.1% share) worked on technologies used in Transaction Mo-nitoring using, for instance, applications of blockchain technology (36.4% of compa-nies in this space) and AI & Machine Lear-ning (27.3%) to enhance transaction moni-toring for financial institution in the Asset Management or Retail Banking space (with each being the primary target of 27.3% of Regtech companies in our sample). Also known as Know Your Transaction (KYT) solutions, they included:

• monitoring of all customer data in real-time, spotting anomalies to outsmart risk, protecting the customers and increasing revenue;

• identifying illicit activity on cryp-to-currency blockchains and provide auditable proofs of licit or illicit crypto transactions to regulators and law en-forcement agencies; and

• examining physical and digital iden-tity elements, with transactional beha-viours and insights.

Regtech Interview -NetGuardians

“At NetGuardians, we take a unique approach to fraud and risk assurance solutions by leveraging Big Data to correlate and analyse behaviours across the entire bank system – not just at the transaction level. This broader vision is the secret to our creative edge.”

– Joël Winteregg, CEO and co-founder at NetGuardians SA.

NetGuardians is an award winning Swiss Regech. Established in 2007, they help over 50 Tier 1 to Tier 3 banks worldwide fight financial crime. NetGuardians developed the first augmented intelligence solution made for banks to proactively prevent fraud. The company empowers their clients by providing machine learning technology together with contextual information and a great user experience.

Banks using NetGuardians solution achieved 83% reduction in false positives, saved 93% of the time lost in fraud investigation, and prevented new fraud cases. The company was recognised as Gartner Cool Vendor in 2015 and Chartis RiskTech 100 Vendor in 2018. NetGuardians specifically targets internet and mobile banking fraud, internal fraud, payments fraud and fraudulent attempts to use a bank’s connection to the international SWIFT network. More information: www.netguardians.ch”

Banks deal with billions of transactions that need to be monitored from an opera-tional risk point of view but also because of regulatory requirements such as the MIFID II (Directive on Markets in Financial Instruments II) and Anti Money Laundering (AML) directives. Fraud is increasing not only in volume, but also in sophistication. Tech-savvy customers increasingly ex-pect financial institutions to deliver on-de-mand financial services such as instant payments, requiring them to be ready to deliver fast, safe, streamlined processes that are more demanding from a regulatory standpoint.

10

1a 1bdebout

1bcouché

2a 2bdebout

2bcouché

3a 3bdebout

3bcouché

4a 4bdebout

4bcouché

5a 5bdebout

5bcouché

6a 6bdebout

6bcouché

7a


9.1

Cloud9.1

Blockchain36.4

BigData9.1

API9.1


Technologies used by transaction monitoring Regtechs

Regtech Interview - Elliptic

“At Elliptic, we reveal the truth behind Bitcoin activity. Elliptic’s team of computer scientists and former law-enforcement agents has developed software to make Bitcoin activity more transparent and accoun-table. Today the world’s largest banks and Bitcoin exchanges use Elliptic software to monitor billions of dollars in Bitcoin transactions every month, and the top law enforcement agencies use Elliptic software to investigate Bitcoin’s role in cases of terrorist financing, arms trafficking, child pornography, and black-mail. Elliptic software is recognised in the Bitcoin industry as the standard for regulatory compliance and forensic investigations.”

– James Smith, CEO Elliptic

• Established in 2013 as a custody business for digital currencies, the Vault Platform, Elliptic quickly identified an opportunity in Bitcoin transaction intelligence. Today it is a data company that relies on Machine Learning and graph analysis to identify patterns of illicit behaviour on the Bitcoin blockchain, and identify whether parties to a given transaction on the Bitcoin blockchain are dis-playing such behaviour

• It does so through two different SaaS products, an Anti-Money Laundering / Counter-Terrorism Financing product to identify and prevent illicit activities, and a Forensics product focusing on tracing Bitcoin transactions. The company also provides special in-vestigative services to its clients, who come from three broad categories: Bitcoin exchanges and other companies who transact a lot in Bitcoin (payment processors, custodians, OTC providers), regulatory and law enforcement agencies, and banks and financial institutions

• Many financial institutions are quick to associate crypto-currencies with criminal activities, neglecting the fact that the Blockchain technology that underpins them offers in many ways more transparency than existing ways of transacting, and Elliptic’s ultimate goal is to allow clients to transact in crypto-currencies knowing that they are in compliance with rules around AML and CTF

11

50%of Regtechs in the Compliance Management category were targeting all lines of business and support functions across the bank

5. Smooth and automated Compliance Management

The fifth group of Regtech companies we singled out for the purpose of this study of-fers services to assist Compliance teams in their daily tasks. Compliance Management relates to the processes by which financial institutions ensure that a set of people are following a given set of rules. It entails po-licies, procedures, documentation, internal auditing practices, third party audits, secu-rity controls, and technological enforcement. The main technologies that are leveraged to transform these processes are AI & Machine Learning as well as Cloud services (each being used by 37.5% of companies in our sample) with most solutions (50% of com-panies in the category) targeting all Lines of Business and support functions across the

Regtech Interview - Fortia

“Fortia Financial Solutions can automatically detect all the rules and guidelines that are present in diffe-rent sources of data or files (structured or unstructured). Innova technologies automatically transform the semantic guidelines and tools into calculating ratios. In addition, it significantly reduces false posi-tives and therefore the users can focus on fraudulent cases. Implement a solid operation, surveillance system and protect the company from customers’ fraudulent actions.”

• Fortia Financial Solutions is a software provider company founded by professional asset managers and engineers. After 4 years of R&D, Fortia launched a low-code solution that is easily implemented by its clients

• Fortia Financial Solutions is a RegTech delivering compliance, internal control and reporting solutions to financial institutions. The solutions address the compliance and risk challenges by automating this compliance process with Artificial Intelligence and Machine Learning algorithms

Thanks to its Innova solution, Fortia reduces the risk of non-compliance and frauds. Fortia has finished to develop the first version of its solutions Innova (Fortia platform) which was launched in 2015. It has seven clients online. In the competitive Regtech race Fortia has demonstrated a strong track record thanks to its Data Scientists population (13 persons) who have developed advanced Artifi-cial Intelligence that have proven capacity to design the new world of fund compliance. Fortia Machine learning based technology is progressively converging to a deep learning technology.”

bank. Applications of new technologies to Compliance Management have taken the following forms:

• automating the entire end-to-end com-pliance lifecycle with an enterprise-wide regulatory intelligence and change plat-form;

• combining regulatory monitoring, col-laboration and communication tools with Cloud technologies enabling timely and cost-effective delivery and Machine Learning and analytics ensuring that content stays relevant and up-to-date; and

• enabling organisations to upgrade their cyber security, risk management and compliance capabilities.

Compliance Management is the number 1 category where financial institutions are open to and expecting an increase in collabo-ration with Regtech providers. We estimate that roughly 30% of Banks are expecting more involvement from Regtech Compliance Management solutions in the coming years.

12

Technologies used by compliance management Regtechs

Client breakdown for compliance management Regtechs

2a 2bdebout

2bcouché

3a 3bdebout

3bcouché

4a 4bdebout

4bcouché

5a 5bdebout

5bcouché

6a 6bdebout

6bcouché

7a 7b 8a 8b

Other12.5


Cloud37.5


2bcouché

3a 3bdebout

3bcouché

4a 4bdebout

4bcouché

5a 5bdebout

5bcouché

6a 6bdebout

6bcouché

7a 7b 8a 8b partde9(1)

part..

RegTech lassi ca ion

0 10 20 30 40 50 60 70 80 90 100

ComplianceManagement

50.0AllLoB Support unction

25.0Retailbanking

25.0CIB

13

Main Clients Targeted by Regtech companiesRegtech has affected compliance issues across all banks’ lines of business and support functions. Taking a close look at the type of banking clients Regtech com-panies are specifically targeting, we’ve identified two groups:

Group A: the specialists, offering pro-ducts and services for one specific line of business:

• Asset Management which includes Investment Funds, Brokers, Asset & Wealth Management division of Banks (28.4%);

• Corporate and Investment Banks (CIB) which include activities such as Capital markets, Structured Fi-nancing, Corporate Finance Advisory, (20.7%);

• Retail Banking including Deposit and Lending activities, Online Banking, Specialist Credit Institutions, and Commercial Banking (12;1%);

• Insurance (5.2%).

And the Group B Generalist:• Transversal – all lines of business

and support functions of a bank in-cluding risk, compliance, finance and support departments (22.4%);

• Multisector solutions – catering to other sectors beyond banking and financial services (11.2%).

28,4% of the clients targeted by Regtechs are in the Asset Management sector

European Regtech client breakdown

Client breakdown for each subcategory

3a 3bdebout

3bcouché

4a 4bdebout

4bcouché

5a 5bdebout

5bcouché

6a 6bdebout

6bcouché


partde9(2)

part..

Retailbanking12.1

Other11.2

In urance5.2

CIB20.7

A etManagement28.4

AllLoB Support unction22.4

14

Understanding the technologies powering Regtechs

Technologies powering Regtech

Client breakdown for each technology

4a 4bdebout

4bcouché

5a 5bdebout

5bcouché

6a 6bdebout

6bcouché


partde9(2)

partde9(3)

partde9(4)

partde9(5)

10a

Other3.7


Cloud19.4

Blockchain5.6

BigData18.5

API14.8

AI/RPA1.9

AI/NLP1.9


Client breakdown for each technology

considerable amounts of time and money that was previously spent on repeating the same processes across banks and their subsidiaries.

26.85%of Regtechs are using AI technology (AI/Machine Learning, AI/API or AI/RPA)

Three technological developments that have gained in prominence over the last decade can be seen as the drivers behind the rise of Regtech: Cloud Computing, Big Data and Artificial Intelligence. While the widespread adoption of blockchain tech-nology by banks is uncertain and remains a few years away, those three technologies are now key priorities of financial institu-tions when it comes to investments in di-gitisation and innovation. Used together, they enable banks to make a smarter use of the vast amounts of data they process for compliance purposes, all while redu-cing costs linked to complex and outdated legacy IT systems.

Cloud technology has been pivotal in fa-cilitating regulatory reporting by minimi-sing data conversion times and improving communication with end recipients / su-pervisors who receive data in the desired, standardised formats.

In the near future, blockchain technolo-gies could have a revolutionary effect in remodelling the way certain compliance processes are being handled. Being tamper-proof and easily auditable, a blockchain of KYC data could in the future allow financial actors to share their clients’ KYC documentation with each other in an instant and a secure manner at the request of the end customer, thereby saving banks

15

5a 5bdebout

5bcouché

6a 6bdebout

6bcouché


partde9(2)

partde9(3)

partde9(4)

partde9(5)

10a 10b 10c

Regula ion

0 10 20 30 40 50 60 70 80 90 100

o RegTechcom anies or heregula ion echnology

Anacrédit

BCBS239

CRDI

E 4thAMLDirecti e

R B

DPR

IRRBB

MI IDII

OtherRegulation

PRIIPS

PSD2

11.8

11.1

15.4

18.8

13.3

11.6

19.2

14.0

11.1

13.3

18.8

23.8

11.1

18.2

20.6

33.3

11.5

18.8

16.7

44.4

25.6

25.0

23.8

18.2

11.5

45.5

26.5

22.2

28.8

25.0

30.0

44.4

20.9

25.0

23.8

45.5

11.8

11.1

19.2

20.0

16.3

14.3

11.8

18.2

3.8

6.3

3.8

5.6

9.6

5.9

9.1 9.1

5.9

5.6

6.36.3

9.6

9.1

3.3

9.5

5.8

3.3

4.7

5.8

4.8

9.1

9.1 9.1

Technology

AI/MachineLearning

AI/NLP

AI/RPA

API

BigData

Blockchain

Cloud


Other

How can Regtech help banks take on future regulatory challenges?

18.93% of Regtech companies in our study help tackle the EU 4th AML directive

Regulatory topics tackled by Regtech

Technology breakdown to help you match regulatory requirements

4bcouché

5a 5bdebout

5bcouché

6a 6bdebout

6bcouché


partde9(2)

partde9(3)

partde9(4)

partde9(5)

10a 10b 10c

PSD23.4 PRIIPS

6.3

OtherRegulation18.4

MI IDII14.6

IRRBB

DPR10.7

R B4.9

E 4thAMLDirecti e18.9

CRDI5.8

BCBS23911.2

Anacrédit

Banks tend to take a conservative ap-proach to AI technologies in compliance largely because of their lack of experience in this domain. But they may be passing on the opportunity to inject efficiency into the compliance process, and most are current-ly restricting the application of new tech-nology-based solutions to very specific use cases at the Proof of Concept stage.

Out of the 80 Regtech studied for this pa-per, here were the most common regula-tory topics and pieces of legislation they helped their banking clients tackle:

• The EU 4th AML Directive (19.93%) re-lated to anti-money laundering (KYC & KYT as previously mentioned);

• MIFIID II, the EU’s Directive on Markets in Financial Instruments II (14.56%), a wide-ranging piece of legislation pri-marily targeted at the CIB and Asset Management businesses and cove-ring inter alia transaction monitoring, KYC in the investment context, and the distribution of research;

• BCBS239: principles for effective risk data aggregation and risk reporting (11.17%).

16

Key trends of the benchmark This study highlights three major trends:

The first one is related to the age and the geographical location of these Regtech companies. These companies remain quite young, with the majority (86%) in our sample created after 2008. This coincides with the financial crisis and the new era of financial regulations that came about as a result. Unsurprisingly, they are concen-trated in Western European countries with strong financial centres, with 47% of the Regtech companies in our sample hailing from the United Kingdom.

Asset Management, with 28% of compa-nies in our sample primarily targeting this line of business, came out on top as clients of choice for Regtech companies. Other important clients were all lines of business and support functions followed by CIB.

The most important technologies in Re-gtech are AI / ML (used by 23% of com-panies in our sample), followed by Cloud (19%) and Big Data (19%). These three technologies are closely tied together, and several factors explain their importance: the smart use of data has become a strate-gic priority for every sector of the economy and few companies produce and process vast amounts of data like banks do. Added to that, ever-more stringent regulatory re-quirements on record keeping from regu-lators make it crucial for banks to stay on top of data management.

47% of Regtechs covered in this study are from the UK

5a 5bdebout

5bcouché

6a 6bdebout

6bcouché


partde9(2)

partde9(3)

partde9(4)

partde9(5)

10a 10b 10c

AI/MachineLearning23,1%

5a 5bdebout

5bcouché

6a 6bdebout

6bcouché


partde9(2)

partde9(3)

partde9(4)

partde9(5)

10a 10b 10c

EU4thAMLDirective18,9%

5a 5bdebout

5bcouché

6a 6bdebout

6bcouché


partde9(2)

partde9(3)

partde9(4)

partde9(5)

10a 10b 10c

UnitedKingdom46,9%

5a 5bdebout

5bcouché

6a 6bdebout

6bcouché


partde9(2)

partde9(3)

partde9(4)

partde9(5)

10a 10b 10c

AssetManagement28,4%

5a 5bdebout

5bcouché

6a 6bdebout

6bcouché


partde9(2)

partde9(3)

partde9(4)

partde9(5)

10a 10b 10c

IdentityManagement&

Control27,2%

17

Top 10 bank-focused Regtech companies by amount of equity capital raised

Unsurprisingly given London's long track record of nurturing a successful tech ecosystem and advanced venture capital industry in one of the world’s most pro-minent financial services hub, UK start-ups are leading the way in venture capital funding in Europe.

The most successful bank-focused Reg-tech companies when it comes to fundrai-sing have tended to focus on Regtech solu-tions in the Identity Management & Control space, tackling AML and CTF regulations, particularly NetGuardians, Fenergo, Bio-catch, ComplyAdvantage, Contego and El-

Fundraising and M&A in Regtech

liptic. BCBS239 (Risk Data and Regulatory Management) and MiFID II are respectively the second and third hottest topics for in-vestors in this top 10.

Topping the ranking of VC funding by a Re-gtech company, Fenergo is one of the most mature of the post-crisis wave of Regtech companies with solutions covering KYC/AML and tax compliance, client onboarding and lifecycle management. Its all-encom-passing RegTech solution relying on a wide range of technologies from cloud to AI has met with success among both CIB and retail banking customers around the world.

The top 3 is completed by OpenGamma, an analytics company focused on solving MiFID II challenges in the derivatives mar-kets, and Behavox, an AI-powered market surveillance tool.

The common factor of these three compa-nies is their ability to attract interest from both global VC funds as well as incumbent companies in capital markets infrastruc-ture and banking.

5a 5bdebout

5bcouché

6a 6bdebout

6bcouché


partde9(2)

partde9(3)

partde9(4)

partde9(5)

10a 10b 10c

Company

5M€ 10M€ 15M€ 20M€ 25M€ 30M€ 35M€ 40M€ 45M€ 50M€ 55M€ 60M€ 65M€ 70M€

Fundsraised(EURm)

Fenergo

Onfido

OpenGamma

FeatureSpace

Behavox

Netguardians

Elliptic

Biocatch

ComplyAdvantage

Trustev

65.4M€

49.0M€

11.7M€

17.4M€

32.7M€

31.1M€

9.4M€

6.7M€

9.8M€

6.3M€

RegTechClassification

IdentityManagement&Cont..

MarketSurveillance

Risk-DataManagement

TransactionMonitoring

5a 5bdebout

5bcouché

6a 6bdebout

6bcouché


partde9(2)

partde9(3)

partde9(4)

partde9(5)

10a 10b 10c

Company

5M€ 10M€ 15M€ 20M€ 25M€ 30M€ 35M€ 40M€ 45M€ 50M€ 55M€ 60M€ 65M€ 70M€

Fundsraised(EURm)

Fenergo

Onfido

OpenGamma

FeatureSpace

Behavox

Netguardians

Elliptic

Biocatch

ComplyAdvantage

Trustev

65.4M€

49.0M€

11.7M€

17.4M€

32.7M€

31.1M€

9.4M€

6.7M€

9.8M€

6.3M€



MarketSurveillance

Risk-DataManagement


18

5a 5bdebout

5bcouché

6a 6bdebout

6bcouché


partde9(2)

partde9(3)

partde9(4)

partde9(5)

10a 10b 10c


0M€ 20M€ 40M€ 60M€ 80M€ 100M€ 120M€ 140M€ 160M€ 180M€

Fundsraised(EURm)byRegTechClassification

IdentityManagement&Control


Risk-DataManagement

MarketSurveillance

CommunicationMonitoring

RegulatoryReporting


ControlsAutomation

160.7M€

48.6M€

38.2M€

22.1M€

7.1M€

5.3M€

0.0M€

0.0M€




Risk-DataManagement

MarketSurveillance


RegulatoryReporting


ControlsAutomation

5a 5bdebout

5bcouché

6a 6bdebout

6bcouché


partde9(2)

partde9(3)

partde9(4)

partde9(5)

10a 10b 10c


0M€ 20M€ 40M€ 60M€ 80M€ 100M€ 120M€ 140M€ 160M€ 180M€

Fundsraised(EURm)byRegTechClassification

IdentityManagement&Control


Risk-DataManagement

MarketSurveillance


RegulatoryReporting


ControlsAutomation

160.7M€

48.6M€

38.2M€

22.1M€

7.1M€

5.3M€

0.0M€

0.0M€




Risk-DataManagement

MarketSurveillance


RegulatoryReporting


ControlsAutomation

5a 5bdebout

5bcouché

6a 6bdebout

6bcouché


partde9(2)

partde9(3)

partde9(4)

partde9(5)

10a 10b 10c

Technology

0M€ 10M€ 20M€ 30M€ 40M€ 50M€ 60M€ 70M€ 80M€ 90M€

Fundsraised(EURm)byTechnologyused

AI/MachineLearning

API

Cloud

BigData

ERP/Software/WebPlat..

Blockchain

Other

AI/RPA

AI/NLP

80.7M€

75.1M€

49.3M€

40.6M€

13.2M€

11.0M€

8.7M€

2.0M€

1.2M€

Technology

AI/MachineLearning

API

Cloud

BigData


Blockchain

Other

AI/RPA

AI/NLP

5a 5bdebout

5bcouché

6a 6bdebout

6bcouché


partde9(2)

partde9(3)

partde9(4)

partde9(5)

10a 10b 10c

Technology

0M€ 10M€ 20M€ 30M€ 40M€ 50M€ 60M€ 70M€ 80M€ 90M€

Fundsraised(EURm)byTechnologyused

AI/MachineLearning

API

Cloud

BigData

ERP/Software/WebPlat..

Blockchain

Other

AI/RPA

AI/NLP

80.7M€

75.1M€

49.3M€

40.6M€

13.2M€

11.0M€

8.7M€

2.0M€

1.2M€

Technology

AI/MachineLearning

API

Cloud

BigData


Blockchain

Other

AI/RPA

AI/NLP

Amount of equity capital raised by subcategory

Amount of equity capital raised by technology

19

Significant M&A transactions in the European Regtech space

While it is still relatively early in the indus-try's lifecycle to see waves of M&A shaking up the sector, a few high-profile Regtech transactions have taken place since 2015.

The most visible trend in Regtech M&A has been interest from US tech and mar-ket infrastructure groups for success-ful European Regtech solutions. This is exemplified by the purchase of Qumram's technology and intellectual property by Dynatrace, a leader in Application and Di-gital Performance Management and pro-vider of a full-stack monitoring offering. Nasdaq's purchase of Sybenetix's market

Company CountryRegTech

ClassificationBuyer Buyer country

Announcement date

Qumram SwitzerlandCommunication

MonitoringDynatrace USA Nov. 2017

Sybenetix UK Market Surveillance Nasdaq USA Jul. 2017

Ancoa Software UK Market Surveillance Cinnober Sweden May 2017

Abide Financial UKRegulatory Repor-

ting

NEX Group (former-ly ICAP's Post Trade

Risk, Information Services and

Electronic Markets business)

UK Oct. 2016

Trustev IrelandTransaction Moni-

toringTransunion USA Dec. 2015

surveillance technology, used mainly for conduct monitoring of traders in capital markets functions, is perhaps the most high-profile and telling investment by a world-renowned exchange and capital markets technology provider.

The common theme across these transac-tions is the addition of the latest technolo-gies and services in their respective fields to the buyers' existing suite of enterprise offerings to the banking and financial ser-vices sectors.

European banks are operating in a very dense, fast-changing and highly complex regulatory environment resulting in many challenges. Since 2015 no less than 18 new directives or regulations have been announced for implementation between 2016 and 2020 which leads banks to face major challenges mentioned in our study (please refer to section 2)

On the revenue side, restrictions on pro-prietary trading, years of low interest rates and competition from new and non-bank players is putting margins under pres-sure. On the expenses side, fines have exceeded US$200 billion, and the cost of regulation and compliance has become a primary concern. Banks are focusing more resources to Risk, Regulatory, KYC and An-ti-Money Laundering (AML-CT) compliance than ever before. Compliance spending has focused on industrialisation of bu-siness process, back-office re-enginee-ring and IT software upgrades, and banks’ compliance departments have grown in size and in importance.

Regtech may hold the key to unlocking value in compliance. In an age of growing concern about AI and the (mis)use of data by large corporations, Regtech companies show a more positive side to Big Data and analytics. Technologies that help detect and prevent illicit transactions and frau-dulent behaviour on the part of traders can be of considerable help in the mana-gement of risk by systemically important financial institutions worldwide. As banks’ IT systems gain in agility, increasing colla-boration with Regtech and Fintech actors should benefit all stakeholders. This may prove crucial in re-establishing confidence in banks and the wider financial system.

Conclusion

20

21

Appendix– detailed focus on RegTechs interviewed in the Study

General

• MiFID II requires financial advisors pro-viding investment advice and portfolio management services to have a detailed understanding of their clients’ risk profile to ensure recommended financial pro-ducts are suitable

• Using advances in behavioural finance and machine learning, Neuroprofi-ler offers a scientific, compliant and user-friendly solution to the MiFID II Client Suitability Assessment (CSA) re-quirement

• The solution is offered as a SaaS plat-form and an API to cater to both inde-pendent financial advisors and larger retail and private banks

• The use of machine learning leads to a continuously increasing predictive power of the risk profiles

End-to-end Client Suitability Assessment to provide personalized investment advice

Benefits of the solution

Financial advisor sends a link to the game

Customer plays the game on any device

Financial advisor accesses risk profile from account

Financial advisor can provide tailor-made investment advice

Profile is archived for future reference

Profile is updated periodically

MiFID II-compliant• Performs risk profiling according to the

latest recommendations of ESMA and national regulators in operating coun-tries

• Covers entire CSA process: demogra-phic information, investment objectives, risk profile, financial knowledge & expe-rience…

Scientific methodology• Models risk attitudes using Nobel

Prize-winning Prospect Theory• Highly detailed risk profile: risk and loss

aversion, optimism…• Assesses time preferences as well : pre-

sent bias, impatience• Robustness checks in place to ensure

the profile is accurate

User-friendly solution• Serious game played on any smart-

phone, tablet or computer• Improved user experience compared to

standard paper questionnaire solutions• Provides customers with feedback and

personalized advice on their risk profile beyond the realm of investment (career, decision-making)

Neuroprofiler

Creation 2016

Sub-Sector Risk-Data Management

CEO Tiphaine SALTIN

Size 7 employees

Technologies Deep learning, API

Investors and funds raised Part of different incubators: Fintech Inno-

vation Lab, BNP WAI, ING Fintech Village, Fintech Fusion, Kickstart €500k raised

Target and major clients• Financial advisors

• BPCE, ING, SG, BNP…

Awards and rankings1st prize Global Fintech

Challenge BPCE

http://www.neuroprofiler.com/

22

Functionalities

Strategic orientations

Competitors & market position

olia

ne

usto er alue eUX, quality of service, rewards

Bank internalsolution

Financial knowledge

Asset allocation

Personality test

The game includes a quiz based on World Bank financial literacy research to evaluate clients’ financial knowledge:

• Ensures that clients know and understand the products being recommended to them Helps create targeted financial literacy modules

Neuroprofiler offers a service that matches the behavioural data of the risk profile with suitable investment products:

• Provides custom asset allocation determined from the 1M+ risk profiles the algorithm can produce• Selects financial products depending on risk aversion, loss aversion, optimism and time prefe-

rences

Insight from the game are summarised in a personality test-like document to reward the client for taking the time to play:

• Provides clear insight about the client’s psychology and decision-making patterns

• Offers advice and tips with regards to career and financial decisions based on the profile

Capitalise on expertise gained navigating Europe’s advanced regulatory apparatus

to enter Asia and the United States with a competitive advantage

Form key partnerships with other players in the digital ecosystem to offer innova-tive differentiated solutions: integration with robo-advisors, crowdfunding plat-forms, toolkits and bundled solutions

Explore applications of behavioural economics and machine learning in other verticals: credit scoring, talent manage-

ment, insurance

23

How Elliptic identifies illicit activity on the Bitcoin blockchain

Elliptic

General

• Elliptic was born out of the three co-foun-ders’ wish to be part of the crypto revo-lution currently taking place that may determine how value is transferred in the future. They first established Elliptic in 2013 as a custody business for digital currencies, the Vault Platform, and qui-ckly identified an opportunity in Bitcoin transaction intelligence

• Today, Elliptic is a data company that relies on Machine Learning and graph analysis to identify patterns of illicit be-haviour on the Bitcoin blockchain, and identify whether parties to a given tran-saction on the Bitcoin blockchain are displaying such behaviour

• It does so through two different SaaS products, an AML/CTF product to iden-tify and prevent illicit activities, and a Forensics product focusing on tracing Bitcoin transactions. The company also provides special investigative services

to its clients, who come from three broad categories: Bitcoin exchanges and other companies who transact a lot in Bitcoin (payment processors, custodians, OTC providers), regulatory and law enforce-ment agencies, and banks and financial institutions

• Many financial institutions are quick to associate crypto-currencies with crimi-nal activities, neglecting the fact that the Blockchain technology that underpins them offers in many ways more transpa-rency than existing ways of transacting, and Elliptic’s ultimate goal is to allow clients to transact in crypto-currencies knowing that they are in compliance with rules around Anti Money Laundering (AML) and Counter-Terrorism Financing (CTF)

• The company today has 22 employees split between its London, Washington, DC. and San Francisco offices

Different entities tend to follow cer-tain patterns when they transact and

can thus be gathe-red in clusters

Elliptic seeks to tie a specific Bitcoin address to a cluster pattern, and based on this

assigns it a risk score

Transactions following a suspicious pattern are flag-

ged as high risk and blocked or investigated

Gambling site

Crypto exchange

Dark web marketplace

Creation 2013

Sub-Sector Transaction Monitoring

CEO James Smith

Size 22 employees

Technologies Machine Learning

Investors and funds raised

A total of $12m in funding from Signal Fire,

Paladin Capital Group, Santander InnoVentures,

KRW Schindler, Digital Currency Group and Octopus Ventures

Target and major clients

• Crypto-currency ex-changes

• Law enforcement• Financial Institutions

Awards and rankings

2015 Security Project of the Year Award, 2015 Swift Innotribe Growth Stage Startup Compe-tition, Top 10 Global

Emerging Star: KPMG Fintech 100

https://www.elliptic.co/

Elliptic is able to provide auditable proof of identity for millions of Bitcoin addresses

across thousands of real world entities

24

AML / CTF product suite (SaaS)

Forensics product (SaaS)

Investigative and training services


Serving three types of clients

2013

Elliptic is founded as a Vault platform for digital

currencies

The company raises seed funding with

Seedcamp and Octopus Ventures

Launch of the first AML product

Series A round led by US investors Paladin Capi-

tal Group and Santander InnoVentures

Series B round of fun-ding led by Signal Fire

2014 2015 2016 2017


As new crypto exchanges creep up around the world, Elliptic’s ambition is to be able to serve clients worldwide. To ensure that more and more banks

are comfortable transacting in Bitcoin it is also looking to partner up with other regtech or technology providers to the

financial services sector

Digital Currency Exchanges & companies transacting in Bitcoin (payment proces-

sors, OTC providers, custodians). This category stands for over 50% of

Elliptic’s revenues

Regulatory & law enforcement agencies Banks & financial institutions

Elliptic’s capabilities will be extended to transactions on the Ethereum blockchain by end of March 2018. The aim is to cover other crypto-currencies and blockchains

in the future

Adding data sources is key to successful-ly identifying illicit activity on the Bitcoin Blockchain, and a challenge for Elliptic will be to keep integrating new sources for data collection in order to improve the Machine Learning engine and its

predictive power

25

MIFID 2 post-trade transparency

KIID & PRIIPs reporting

KYC/AML (4th AMLD, Sapin 2)

Credit & Liquidity Risk

BCBS 239 Risk Data Aggregation

FRTB

Dodd-Frank / EMIR

Product : a flexible & accountable platform Targeted regulations topics

Scaled risk

General

• Scaled Risk was created in 2012 by two ex-Thomson Reuters’ employees. The company’s mission is allow financial firms to overcome the analytics & repor-ting challenges brought by today’s new regulations with flexible & accountable data technologies

• Today, Scaled Risk is a RegTech sof-tware company providing the Financial Services Industry with a single, flexible and auditable platform to address key reporting & analytics needs of capital markets, asset management and retail banking firms

• The product works like an “off-the-shelf” data lake : it captures the enterprise’s

siloed data within a single repository, handles indexing & documentation au-tomatically, to let the user build purpo-se-specific data views & analytics while recording all actions in order to provide a full audit trail.

• A key differentiating feature is that the platform allows its clients to insert new data in the database without overwri-ting old ones and to organize them with a comprehensive time consistency approach that embrace both system and functional times. This provides a “time-machine” view on data which is key for reports audit

Creation 2012

Sub-Sector Data management

CEO Thierry Duchamp

Size 15 employees

Technologies Big Data


500k€ seed from Fi-naxys. Currently raising

EUR 5M


• Financial Institutions• Financial Authorities• Regulated corporates

Awards and rankings

2016 : innovative project in Big Data, awarded by BPI and French Ministry of Economy and Finance

2017 : Deloitte RegTe-chUniverse + Reg-

Tech100

SECURE & AUDITABLE BIG DATA STORAGE Innovative quick data onboarding into an enterprise class security

and resilience storage. full audit trail & data lineage with golden copies and version control.

REAL-TIME DATA PREP & ANALYTICS Powerful in-memory execution engine to build real-time views

& analytics on real-time data

OPEN ARCHITECTURE, FLEXIBLE IMPLEMENTATION Built on open standards, flexible application services and APIs

for rapid and agile implementation.

www.scaledrisk.com

26

Clients’ benefits

TradesMarket

CRME-m

ails

DocumentsWeb

(news...) Social

networks

Payments

1 Capture enterprise data « as is » in the platform

2 Prepare/clean the data and run reports & analytics

3 Address regulatory reqs. on time and within budget

Store Capture data from silos

Data preparation Build agile data views

Govern Model, versioning, audit

Analyze Real-time analyticsg v

q

M YExplore Google-like search

Control Real-time rules

KIID UCITS Reporting• 1 week to capture 5 data sources

• Automated data reconciliation and quality management : saved 6 months of manual and error-prone operations

• Automated data preparation with consistency checks

KYC Onboarding & on-going customer review • 3 weeks to capture 10 data sources

• 180 real-time alerting rules implemented in 7 weeks

Swift increase in regulatory time-to-market

Reduced operating costs

Reduced non-compliance risk

“The main trend in the market is obviously the increase in volume and pace of

regulatory requirements that drives the business. RegTech need to focus on

their first role which is to identify data & analytics needs resulting from regulations and address these needs with advanced

technologies.”

Considering having a technological lead at this stage, Scaled Risk partners with high-level consultants with whom they

work. They are always looking for new bu-siness applications that will be extremely

useful for their clients

Recent developments (notably with partners) include pre-packaged SaaS mo-dules for Reporting for Asset Managers and Customer Due Diligence for Retail

Banks.


27

Use case on external payment or internet banking fraud Results

BIG

DAT

A

Reduction in the number of false

positives

For each transaction many data points are factored into

the transaction risk score

Transaction is deemed fraudulent and blocked

Transaction fits into the usual pattern and is

processed

NetGuardians combine behavioural analytics and rule sets into a dynamic

profile of each client

Time saved dea-ling with hits

The NG|Screener software provides automated reporting and audit trails

Discovery of new types of fraud

NetGuardians

General

• NetGuardians was founded in 2007 by two Swiss engineers and came out of the work that was done as part of Joël Winteregg’s master thesis on behaviou-ral analytics

• While the original focus was on broader cyber security, in 2010 as banks’ de-mand for cybersecurity tools increased after the financial crisis, the company took a strictly fintech turn, serving banks in the retail and private banking space

• NetGuardians starts with the idea that new ways of banking on the internet, via mobile, and through new payment channels, each bring new risks of fraud. Anti-fraud solutions must cover every channel, be scalable, meet the ever-in-creasing compliance regulations, mini-

mise risk while giving a good customer experience, and protect a bank’s reputa-tion

• Using advanced behavioural analytics, NetGuardians’ system correlates data from across a bank’s entire IT system to detect atypical actions and raise alerts or block a transaction in real-time

• The company specifically targets inter-net banking fraud, internal fraud, mo-bile banking fraud, payments fraud, and frauds trying to use a bank’s connection to the international SWIFT network

• Headquartered in Switzerland, the com-pany has offices in Nairobi, Warsaw and Singapore

Creation 2007

Sub-Sector Transaction Monitoring

CEO Joël WINTEREGG

Size 80 employees

TechnologiesBig Data, Machine

Learning, Augmented Intelligence


CHF 14.5m in total from : Orbium, Polytech Ven-tures, Guillaume Dubray,

Money Time Venture, Swiss Finance Startups


• Banking • Raiffeisen, KCB,

• HFCBank, Zenith Bank, Santander, Reyl, NBK,

Keystone Bank, …

Awards and rankings

• Gartner Cool Vendor 2015

• Fintech50 2017 and 2018 by FinTechCity

• Chartis RiskTech 100 2018

http://www.netguardians.ch

Prosecution

Browser

Currency

Location

CounterpartyAuditing Compliance

28

Use case on external payment or internet banking fraud

Dedicated risk experts

A continued global expansion

Continuously updated controls library

Trusted by financial institutions in 17 countries

Recognised partners

Recognised partners

NetGuardians’ risk team consists of R&D experts as well as risk consul-tants who act as a bridge between the technology and the client’s

business, to ensure that the technology is appropriately targeting the risks faced in the banks’ use cases

NetGuardians’ continuously updated controls library addresses all the latest banking fraud cases and can be accessed for free. This tool

enables the company’s risk experts to keep clients on top of compliance changes

NetGuardians’ provides its services mainly to private banks (Santander, Reyl, Piguet Galland…) and also commercial banks (especially in Africa:

KCB, CBA, CBE). The company enjoys a solid international presence with a steadily growing clientele in Europe, the Middle East, Asia and Africa

with offices in Switzerland, Singapore, Kenya, and Poland.

Core banking software providers like Temenos – who features NetGuar-dians on the MarketPlace platform of approved FinTech solutions. SOF-

GEN, Swisscom, Inlaks and EY Singapore are also NetGuardians partners

NetGuardians’ enterprise risk platform keeps financial institutions safe from fraud. NetGuardians is able to detect and raise alert for internal

fraud (Suspicious transactions to a new destination) and external fraud (Payment fraud, SWIFT transactions, internet banking fraud, mobile fraud)

Chartis Risktech 100 2018

Gartner “Cool Vendor” New offices in Asia and Africa

Top 50 Fintech Europe

20182015 2016 2017

Continue expansion to European markets outside of Switzerland, but also in Africa and Asia through the Nairobi and Singapore offices. A

first project in Canada is also on the cards

Form new partnerships with core banking providers, or similar to the ones forged recently with Swisscom on NG|Cloud to further extend SaaS services.Joins force with Swiss university to focus on AI and

machine learning.


29

A large scope of compliance topics are covered by Fortia solution

Fortia Financial Solutions

General

• Fortia Financial Solutions is a Regtech delivering compliance, internal control and reporting solutions to financial institutions. The solutions address the compliance and risk challenges by au-tomating this compliance process with Artificial Intelligence and Machine Lear-ning algorithms

• With its solution named Innova, Fortia reduces the risk of non-compliance and frauds

Creation 2012

Sub-SectorCompliance

Management

CEO Reda Bouakel

Size 80 employees

TechnologiesAI, Machine and deep

learning learning


• Part of l’Atelier BNP Paribas Fintech Acce-

lerator• BNP Paribas Securities Services bought a mino-

rity stake in 2017


• Global asset mana-gers, banks and insu-

rance companies

http://www.fortia.fr/

• Fortia Financial Solutions is a software provider company founded by professio-nal asset management and engineers. After 4 years of R&D, Fortia launched a low-code solution protected by patents easily implementable for its clients.

• Fortia solutions are distributed on both models, on Saas and in house

Investment Compliance: Fortia solutions can detect automatically all the rules and guidelines that are present in different source of data or files (structured or unstructured). Innova technologies also transform

automatically the semantic guidelines and tools into calculating ratios

Digitalization of 9 core processes dedicated to depositary banks : Legal documentation – Due Diligence – Fund Life Cycle – Investment Compliance – Cash Monitoring – Nav review – Sub & Red controls –

Controls on Safekeeping – Asset Certification

Collaborative Intelligence platform: which optimizes governance within a project team and the manage-ment of operational processes, dedicated to asset managers.

Fund reader : This module is able to automatically identify the fund’s characteristics, score the results according to the degree of reliability and insert the detected data into the funds or clients referential.

Risk Monitoring: Identify and accurately assess risks in respect of the company and its activities and limit exposure to those risks via control measures

BI & Reporting: Gather data to meet reporting, dashboard and analytical management requirements.

30

Focus on Innova – A modular and agile Platform

Data Mgmt

A continued global expansion of Fortia

Robo-Rules

Business Process Mgmt

Electronic Mgmt

Internal Control

The Data Management module of Innova is an ETL-type solution (Extract, Transform, Load) allowing to automatically supply the Innova database

with the necessary data for calculations, consolidations, controls or reportings… It allows the creation of tables duplicating the source data no

matter their nature or format. Data quality management and automatic creation of dictionaries.

The Robo-Rules module of Innova is a state-of-the-art calculation engine covering the whole spectrum of compliance ratios of investment funds, anti-money laundering, KYC, threshold crossing. It can turn a simple rule in text format into a calculation algorithm without any manual interven-

tion. Ratios cover all types of controls.

The BPM module of Innova, allows to model and manage the company’s business processes, both in terms of application and in terms of human

ressources.

The ECM module of Innova allows the electronic management and the storage of all the company’s documents (customers, providers, fund pros-pectuses…). Automatic controls of different types can be applied on the

documentary database (conformity, completeness…)

The Internal Control module of Innova allows to define and map the controls for each business entity or activity…

International ExpansionCreation of Fortia Launch of Innova

Investment of BNPPSS in Fortia

20182012 2015 2017

Regulations rules are global and growing fast. Fortia do its best effort to answers

this new constraint needs globally.

Fortia strategic roadmap drives its solutions to be more intelligent and auto-nomous with predictive analysis abilities, extremely advanced. R&D team works on

new algorithms and math models

The third generation of Fortia solution will be soon on-going with a particular

focused on calculation capacity through deep learning


31

Strategic orient Product : SaaS + custom solution delivery Targeted regulations

KYC3

General

• KYC3 was founded in 2014 with the mission to help financial institutions streamline the tedious Knowing Your Customers, Counterparts and Compe-tition (KYC) processes, which typically involve a high number of man hours and vast amounts of data. Its founder aimed to do so with the help of an automated intelligence solution

• Using big data and machine learning, KYC3 developed an automated solu-tion that gathers and processes vast amounts of data the way a human does, bringing much-needed speed to their clients’ repetitive KYC tasks

Creation 2014

Sub-Sector Risk data management

CEO Chris Marcilla

Size 5 employees

TechnologiesBig Data / Data Mining /

Machine Learning

Investors and funds

raised since inception

N/A


Financial InstitutionsICO Issuers

Blockchain companiesLaw firms – Family

Offices

Awards and rankings

2016 : The Fintech En-trepreneur of the year

2016 : innovative project in Big Data, awarded

by BPI and the French Ministry of Economy

and Finance

www.kyc3.com

• The KYC3 engine sifts through over 55,000 sources of data to find ownership facts, data on political exposure, crimi-nal, civil and legal information, as well as intelligence on competitors

• Clients benefit from the big picture thanks to automated big data collection, analysis and production of reports. KYC3 ties front and back offices together, to re-move the friction between business de-velopment and compliance and support smooth and efficient client on-boarding processes for faster deal closings

Big Data Analytics Connect the firm with all major watch and sanctions lists, political exposure lists, millions of company filings and news content from

more than 55,000 different sources

Real-time KYC checks Front-office and back-office staff can get an instant and auditable proof of KYC checks on their prospects and clients in just seconds

Easy-to-use, customizable interface Built on open standards, flexible application services and APIs for

rapid and agile implementation.

AML/CFT

OFAC

GDPR

Abou Dabi | Amsterdam | Bruxelles | Casablanca | Charlotte Doha | Dubai | Hong Kong | Houston | Londres Luxembourg | Lyon | Milan | Montréal | New York | Paris | Riyad | Rome | Singapour | Tokyo

YOUR CONTACTS

Founded in 1999, Sia Partners is an independent global management consulting firm and pioneer of Consulting 4.0 with over 1,100 consultants and an annual turnover of USD 200 million. The Group has 20 offices in 15 countries. Through unparalleled industry expertise, Sia Partners delivers superior value and tangible results for its clients. True to its innovative approach, Sia Partners explores the possibilities offered by Artificial Intelligence, invests in data science and develops consulting bots. Sia Partners is a global partnership wholly owned by its executives.

Thomas ROCAFULL

Partner BankingTel : + 33 6 26 11 22 [email protected]

Jean-Frédéric CHARDON

Associate Partner BankingTel : + 33 6 73 60 24 [email protected]

Yves GREGOIRE

Associate Partner BankingTel : + 33 6 14 33 10 [email protected]

Follow us on LinkedIn and Twitter @SiaPartnersFor more information on Sia Partners: www.sia-partners.com

ABOUT SIA PARTNERS

YOUR CONTACTS

AEC Fintech is a boutique investment bank providing advisory services on M&A and capital raising in the Fintech and Financial Services sectors. Founded in 2017, AEC Fintech relies on the extensive experience of its team in the specifics of banking and insurance transactions gained at renowned investment banks in Europe, combined with a passion for new technologies. Headed by Stéphane Olmi, Managing Partner, and Adrien Choquet, Associate Director, the team is part of AEC Partners, a Strategy Consultancy and M&A boutique serving clients in Life Sciences and Financial Services worldwide from offices in Paris, Boston, Singapore and Barcelona.

Stéphane OLMI

Managing Partner - Investment BankingTel : + 33 6 11 53 96 [email protected]

Adrien CHOQUET

Associate Director - Investment BankingTel : + 33 7 76 05 97 74 [email protected]

ABOUT AEC FINTECH FintechPantone 1797 / c2-m98-j85-n7Pantone 433 / c84-m69-j55-n70