Anyone who has seen the television show Dragon's Den, in which eager entrepreneurs try to convince investors to back them, will have seen how very tough it can be for startups with no track record or market credibility to get their products assessed and adopted by major league companies.
Well, something not too dissimilar is happening in the finance sector: a vibrant market in innovative financial compliance technologies, collectively known as ‘RegTech’, has sprung up since the global banking crisis of 2008. But how can the smaller firms behind many of these RegTech systems get a foot in the door to sell into heavily regulated financial institutions?
In the heady atmosphere of a ground-breaking startup, it may be tempting to believe that your team's sheer inventiveness will carry you through to success: just code and they will come. But that approach is highly unlikely to succeed given the needs of today's ultra-cautious banks and investment houses.
The fact is, getting your RegTech solution widely adopted in the real world takes a lot more than coding, selling and deploying. To give yourself the best chance to succeed as a RegTech innovator, you need to develop trusted partnerships. The right partner, one that is experienced and already well connected into the global markets, can give you additional reach, deep technological and sector expertise, and a raft of security and deployment options.
If finding the right partner sounds a bit of a hassle, consider the following questions. Where will you start without one? How will you go about effectively marketing your technology? How will you navigate through the complex landscape that is a typical tier one or tier two investment bank? How will you scale your operation to cover new geographies or new markets?
A partner with global sales and marketing channels can help provide that reach and scale. We see evidence of this all the time at Radianz. When a finance house tells us that they need a certain new type of functionality or a solution to cater for a specific regulatory requirement, and we have a RegTech partner offering something technically very similar, we can put you in touch. Who knows? Your software may even end up as a key utility on our platform.
Having a partner with eyes and ears to the ground in markets all over the world can also significantly boost a RegTech’s potential for success.
Being highly dependent upon technology, firms in the capital markets sector need their solution providers to clearly demonstrate their technical experience and expertise in order to be credible. For smaller vendors, navigating and negotiating through some of these organisations can be extremely challenging. Understanding how the complex web of regulations impacts the technology stack of those firms is no small task. In functional areas such as time synchronisation, risk management, transaction reporting, market surveillance or flow monitoring (to name just a few), working with a partner already established within those firms can be essential.
Another area where partnerships can benefit RegTechs is in expanding the deployment capabilities of their solutions, as banks may want elements of their compliance solutions to be deployed on private, public or hybrid cloud - or combinations of these.
At Radianz, we understand the value of partnerships and are always keen to talk to RegTech vendors who want to connect to our global ecosystem of banks, brokers, trading firms and exchanges.
But if partnering is not your thing, you could always go it alone.
Just be prepared to hear your prospect utter that hear that dismissive quip so often uttered by the investors in Dragon's Den: "I'm out!"