July 31, 2024
The quest for financial regulatory modernization has entered a new phase. Regulators are moving beyond developing new tools for suptech — supervisory technology — for overseeing the industry. They are now looking inward, realizing that their own core technology needs to be recreated, from the ground up.
And the financial regulators are far from alone. There is a growing movement to bring all government technology into the digital age, and my guest today is helping to lead that charge. He is Sonny Hashmi, Head of Public Sector at Unqork and previously a commissioner at the U.S. General Services Administration, the GSA.
The technology architecture of governments, almost everywhere, is obsolete. Agencies are still operating on mainframe computers, rather than in the cloud, making their tech inefficient and inflexible. They spend most of their IT budgets on maintenance and patching problems. Employees’ needs sit in IT work queues. People create “workaround” solutions that are time consuming and suboptimal. Processes that should be automated are manual. Both employees and the public struggle with terrible user experience, slow processes, and errors. Agencies need personnel who know programming languages that are no longer taught in school. Government agencies, whatever their mission, suboptimize their effectiveness because they are using crude tools.
There is growing recognition that the government must close this so-called “technical debt” and convert its own technology to digital architecture that enables agility, scalability, and future-proofing.
In our conversation, Sonny explains that this transformation requires new ways of thinking. His company designs enterprise software to be user-centric, intuitive, secure, and low-maintenance, and to integrate open standards, cloud scalability, security by design, and automated maintenance, without the need for writing code.
At the GSA, Sonny ran the Federal Acquisition Service group, responsible for some of the largest government acquisition budgets in the world. He cites shocking numbers on the percentage of IT projects over a million dollars that fail, and argues that activities that take weeks today should take days instead, and should cost a fraction of what we spend today. His tenure enabled the FAS to improve all of its metrics, by going back to first principles and then rebuilding.
Sonny shares advice for government leaders in how to move step by step, asking the right questions. What’s our mission? What does the business need? What’s in the way? And he has guidance: Avoid waterfall work flows. Don’t create new tech debt. Don’t try to solve everything at once. Test assumptions. Don’t pay until it’s working. As someone who oversaw 3,000 procurement officials across the world, he shares insights on how to address the famously bureaucratic procurement process work. And he offers sage advice on solving the challenges of talent and culture.
Our conversation references the book Recoding America, by Jennifer Palkha, who founded Code for America and was part of the U.S. Digital Service and the White House team that solved the early technology failures of the Affordable Care Act. Like Sonny, she is catalyzing a deep rethinking of how government should operate, pinpointing what makes it difficult and clearing those obstacles. Like everything we talk about on Barefoot Innovation, this isn’t mainly a tech challenge. It’s a people challenge. People, institutions, cultures. We can do better.
AIR is doing a lot of work on how to do so in the realm of financial regulation. First, we have a show coming up with Congresswoman Erin Houchin (R-IN), who has sponsored legislation called the FUTURES Act, which would require the federal financial institution regulators to self-assess their own readiness to oversee the technological transformation of the industry they oversee. The bill would require the agencies to consult with each other and report back to Congress on status, needs and plans. It has bipartisan sponsorship, passed the House Financial Services Committee without opposition, and is supported by industry advocates of small banks for its potential to streamline regulatory processes while also improving results.
Second, we recently published an AIR white paper on the Financial Regulators’ Odyssey, the journey that nearly all regulators have embarked on, or soon will, to modernize their technology. The paper is authored by my colleague Nick Cook, who previously led the innovation division at the U.K. Financial Conduct Authority. Nick’s paper walks through the decisions that lie ahead for regulators on technology, talent and culture. He and I will record a podcast on it as well. (I’ll also link in the show notes to some episodes we’ve done with agencies that are well along on this journey.)
Third, by popular demand from senior regulators, AIR has also begun work on an update to our 2020 paper, The Financial Regulators’ Dilemma. The original examined laws and protocols that impede the innovation efforts of regulators in the U.S., as reported by the agencies themselves. The new paper will update that analysis, with emphasis on procurement and personnel challenges. It is being prepared for AIR by the Orrick law firm as a pro bono project.
And forth, I’m making speeches and penning articles arguing that AI will bring a paradigm shift for financial regulation. Watch for those coming up!
We tend to take for granted that governments just have backward technology and arcane processes. But, why should they? The private sector has been digitizing for a decade, creating vastly more convenience and better user experience, and solving problems that used to plague us. Regulators are starting to do the same thing.
This work needs to be tackled by the agencies’ technology and procurement teams, but it needs to fully engage the whole organization. Therefore, it needs to be led at the top, by agency heads helming their organizations into the age of digital information and, of course, AI.
Sonny Hashmi is the Head of Public Sector at Unqork. He leads the adoption and scaling of Unqork’s codeless platform to help government agencies everywhere. Sonny is responsible for helping Unqork’s public sector customers achieve their digital transformation goals, while reducing technical debt and cost to the taxpayers, and while helping to build solutions that deliver increasing value to citizens.
Prior to joining Unqork, Sonny served as a presidential appointee as the commissioner of the U.S. General Services Administration’s (GSA) Federal Acquisition Service (FAS). In this position, he led the delivery of more than $100B of products, services, and solutions that enable federal agencies to efficiently accomplish their missions while saving taxpayer dollars. Sonny has also led growth and GTM for box, as well as served as a federal CIO, FedRAMP and TMF board member, and as a member of several corporate and advisory boards.
Sonny Hashmi is active in the federal IT community and has been recognized with several awards including the Fed100, FedScoop 50, Washington 100 and as a finalist for the prestigious Samuel J. Hayman Service to America medal. He earned a master’s degree in engineering from Purdue University and a master’s certificate in innovation management from the University of Maryland.
We have wonderful guests coming up. Again, we’ll have Congresswoman Erin Houchin on her FUTURES Act legislation. We’ll have Nick Cook join me to talk about our Regulators’ Odyssey white paper. We have a great show coming soon with Penny Lee, President and CEO of the Financial Technology Association, on the issues heating up in bank/fintech relationships. We’ll also have an episode with Jane Barratt, Chief Advocacy Officer at MX.
Summer is here, but great events are still happening. Last month, I spoke at the Exchequer Club in Washington, DC, arguing that a new, AI-based regulatory paradigm is underway. I participated on a wonderful panel at the Brookings Institution on how AI is bringing both risks and opportunities to the financial world. I was able to catch up with many of you at EMERGE, celebrating the 20th anniversary of the Financial Health Network, where I had the honor of previously chairing the board. I did an AI Celebrity Interview for AIR’s NextGen AI Shared Learning Initiative. This month, I’ll be moderating a panel on digital identity, organized by the Aspen Institute. And in August I hope to see many of you at FinTech South.
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