The regtech market is growing, and will become of increasing importance for financial institutions in the months to come. But for Erkin Oksel, CEO of regtech organisation EyesClear, an ingrained culture is preventing banks from investing in technological innovation.
“The people in the banks should be appraised and should be supported when they bring in new technology to solve problems, and they should also be allowed to fail.”
What is happening with EyesClear at the moment?
EyesClear is a little bit different from some of the regtech companies. We provide direct visibility and insight for all global payments of the customer ecosystem. So, we have a different position than some of our colleagues, because the sort of interfaces we have are global.
We started our company two years ago. We have been working on technology-intensive stuff. We managed to finish it two months back, and have just started our marketing.
The sort of challenges we are trying to address are global, but can also be used for local purposes. We are not referring to any specific regulation like FATCA, or SMR, and the only reason is - not because we cannot afford them, it can be used for those purposes - we were trying to create a more generalised capability for the financial institution.
What trends are you seeing in payment clearing?
Regarding payment clearing, Africa is doing some interesting stuff. In relation to mobile payments, there is this East-African payment system coming up. PSD2 is a pretty big thing. I think, right now, the market is trying to adjust. When PSD2 becomes more common place, when the banks start opening up to fintechs, we will be living in a different financial ecosystem than we have right now.
I think the banks are going to become like a second facilitator kind of thing. But there are lots of issues apart from the regulation that need to be addressed. Because what is happening is that the regulator is handing over the certification challenge to the banks. The banks must protect their client accounts against fraud. This is difficult because it basically contradicts the democratisation of payment systems client data.
I am obviously behind this big tech push that is going to come. I think it is going to be more visible and more critical soon. Will that have an impact on the way we live our lives in relation to payments and clearing? Certainly.
You have previously said: “Incentives in banking are aligned with process rather than innovation. This needs to change.” What did you mean?
What I meant by this statement was, if you consider banks and the way that they grow, they were initially set up by entrepreneurs. As the ecosystem evolves, as the number of people grow within the banks, the quick decisions cannot be made. The entrepreneur does not have the time or the resources to look at every detail within the company. So, what they have instead is processors. They basically create a process and then they delegate specific tasks to people throughout the process. When you have the process and person in place, then you have a working delivery from when your creation starts. Based on this process, the technology systems are developed to be able to automate some or all of the activities within the process.
This is how a conventional bank is set up. When you think about it, everything that the individual executive needs to do has been delegated along these processes. Whoever he or she delegates the second line manager also follows the same approach. Innovation is much different.
I was in banking for 15 years. I didn’t know the limitations and the capabilities had shifted so much, because, at the end of the day, the bankers of the processes are aligned with suppliers. Suppliers go to whatever they think is going to sell. And then you relate these things back to clients. So, you are really focusing on your processes again, even for the procurement activities. Outside of all this existing software, there is a whole world evolving. Banks are not able to grasp that.
What would like to see change within the culture of banks?
The incentive structures are becoming quite a limitation, in relation to innovation. Creating ambassadors for start-ups within the bank is a big challenge. We, as start-ups, don’t have the same reputations as big brands like IBM, Microsoft or Oracle. The incentive is not there. We want to make the deal. From a value co-creation perspective, the bank is incentivized. If they onboard those new technologies, it will be good for the bank. But, from the mid-management perspective, there is no incentive. This must change.
The people in the banks should be appraised and should be supported when they bring in new technology to solve problems, and they should also be allowed to fail. I’m not talking about millions of billions of dollars, by the way. It’s finding one resource here and two resources there to be able to have a discussion and meetings. It really is simple stuff. But I think this is a big element in terms of the commercialisations of our sector.
Are there any reasons why you are enforcing the office in London?
It’s simple. There’s the Citi building in Canary Wharf. I was working there for a long time, and this level 39 that we have here is 40 meters away from my Citi ex-company. All my friends are in Barclays, Citi, HSBC, Bank of America, JP Morgan. All of them are 50 meters away from where I set up my business.
While we are doing regtech innovation, you have to do lots and lots of source searching, feedback, interviews - that kind of stuff. Where I sit right now, it was the best place to start EyesClear.
Are there any particular opportunities in London for clearing?
Obviously, we can clear US dollar and sterling here, and we are also able to clear euro. But the idea is that, to have those kinds of clearing centres, you have to keep your central bank balances in a certain location. Since the banks main operations are in London, they are able to clear and do the payments in an efficient and less costing way. From that angle, wherever your capital markets headquarters is, clearing the money there is cheaper.
Technology is global. I don’t believe any borders, or political discussion, will be able to change this fact. Contributors are global, creators are global. So, if you focus on clearing from a technology perspective, I don’t think there is any geographical difference there. From the credit limit perspective, the banks’ credit lines need to be able to keep on doing high value payments. That is one of the opportunities available in London.
How is EyesClear positioning itself now for Brexit?
For EyesClear, what we do is required in every financial institution, with or without Brexit. It won’t make a difference from a custom value creation perspective. There might be complications in relation to commercial agreements and engagements. But what we do is not a regulated industry. So, from that angle, regtech is positioned kind of securely - whatever the Brexit outcome.
Whatever happens, it’s going to be a matter of tax arrangement - where will we be paying the VAT, how will we be paying, and how much will we be paying? From a commercial aspect, I’m not making any specific arrangements with regards to Brexit.
In terms of human resources and physical aspects, even before Brexit I was flexible about that subject. We will need to have a presence close to our clients in the geographic that we operate. It doesn’t matter if it is in the EU. We may try to serve Nordic clients out of London. This is the same as all the US companies do.
What are your plans for the post-Brexit transitionary period?
We are talking to clients right now - in Europe, in the Middle East, and in the UK. Everywhere. I have never come across a “what do you do in the case of Brexit” question. As I mentioned, the sort of activities that regtech does are not regulated.
If there will is a transitionary period or not, for EyesClear it won’t make too much of a difference. My initial focus is to create value for my clients. I kind of assume that the commercial aspect will be addressed naturally. I don’t believe that anyone is going to create an ecosystem where we won’t be able to sell to Europe, or where Europe won’t be able to sell to the UK. I don’t think this is going to take place. I assume for us it will be commercial discussions, rather than practical discussions.
There is the concern that, if Brexit happens, I won’t have access to my Romanian or Norwegian colleagues. However, I don’t think someone is going to cut the internet cables. So long as the internet works we will keep on working.