September 16, 2024
This might be the most important episode we have ever posted, because it’s about the most important paper that AIR has ever published, and about the reason that AIR exists.
For all the regulators and policymakers listening, today’s show is for you.
And for all the financial companies, listen up, because the regulatory world you live in is going to change, and we’re going to talk today about how.
And if you listen to Barefoot Innovation because you care about a specific financial issue — maybe consumer protection, or inclusion, or money laundering and crime — pay attention, because we are on a regulatory modernization path toward better outcomes.
My special guest is Nick Cook. Nick is my colleague at AIR, our Chief Innovation Officer, and formerly, he was Director of the Innovation Division at the U.K. Financial Conduct Authority. He is famously one of the leading financial regulatory innovators in the world. If there can be such a thing as a rock star in a field as arcane as financial regulatory innovation, Nick would be it.
We got together for this episode because he has just written what I consider the most important white paper that AIR has ever published. It’s called, From Legacy Systems to Cutting-Edge Tech: A Financial Regulator's Odyssey and, as the title suggests, it lays out the journey that lies ahead for virtually every financial regulatory body in the world, in catching up their own technology to the age of digitized data and AI.
Their own technology. We’re not talking here about how regulators should oversee the technological transformation of the financial sector. That’s a crucial topic, obviously, and regulators everywhere are devoting tremendous energy to addressing it. Very few, however, are investing anywhere near enough energy and resources in modernizing their own technological capabilities. It is just not good enough, anymore, for agencies to contract with consulting firms to build them “suptech” (supervisory technology) tools that sit on top of the organization’s same old, obsolete tech stack. They have to get rid of the obsolete tech! They have to rebuild themselves as data-centered organizations, operating on a modern data architecture that can keep pace with the permanent technology change that is reshaping today’s world.
The Odyssey paper lays out what the needed changes are and explains the decisions that agencies need to make, such as how to approach the conversion to cloud computing, and the pros and cons of whether to “build or buy” new technology.
As Nick explains in our conversation, though, this undertaking is not just about technology. In fact, it’s not even mainly about technology. It’s mainly about people. The technology is actually the easy part! The hard part, the crucial leadership task, is to create organizations in which the people, and the culture, successfully embrace technological change. Nick draws upon a wealth of experience, observation, and human insight to delve into why this is so difficult, and strategies for making it work.
There is a lot at stake here. Financial regulation matters, because finance matters. We at AIR like to think of financial regulation as an invisible force in everyone’s lives. When it is working well, people thrive. When it fails, people are hurt. Economies are destabilized. Jobs are lost. People can’t get access to services they need and deserve. People can’t buy homes, or build wealth. Businesses don’t get founded or don’t grow. People lose their data to thieves. They lose their savings to scammers. Criminals get rich by preying on people and laundering the resulting profits through the financial system.
We recorded this episode as a video and encourage you to watch. Nick was at his home just outside of London. I’m normally in Washington D.C., in the Navy Yard neighborhood, but for this conversation I was at my home in the Rocky Mountains in the American southwest — so, seven time zones behind Nick. AIR now has people across ten time zones — coast-to-coast in the United States, and with four team members in the U.K. and one in South Africa. We are doing a lot of work in emerging markets, especially in Africa. We are doing a lot of work with international bodies that are driving for changes like expanding inclusion and fighting fraud and corruption.
Let me mention, also, that we’re going to be updating our 2020 paper on the Financial Regulators’ Dilemma, which talks about the many factors that make it hard for regulatory agencies to modernize.
We actually wrote the Regulator’s Odyssey at the suggestion of a regulatory agency head, who asked if we had a paper on how regulators should transform their technology. He said that, if we did, there would be great interest in it. We hope he is right. If you are a regulatory official and would like to talk with us about your technology journey, reach out to Nick or me, and we will be happy to talk. You can find the paper in the show notes and on our home page at www.regulationinnovation.org.
Nick Cook is Chief Innovation Officer at AIR. Based in London, he was previously the Director of the UK Financial Conduct Authority’s (FCA) Innovation Division, including the agency’s RegTech and TechSprint initiatives, its data and analytics strategy, machine learning endeavours, and the “Innovate” program (encompassing the Regulatory Sandbox, innovation and digital policy, and industry-facing direct support services).
In 2016, Nick was responsible for creating and developing the TechSprint as a new methodology for regulatory innovation and public/private collaboration, designing a model that is now widely emulated around the world. He has led TechSprints on challenges ranging from financial crime and regulatory reporting to financial access and inclusion, women’s economic empowerment, pensions, and money and mental health.
At AIR, Nick heads the TechSprint program and the nascent AIR Fair Finance Accelerator, working with partners and the innovation ecosystem to define its scope, governance, strategy, and activities. He helps develop AIR’s relationships with financial regulatory institutions globally and specifically in emerging markets, and he represents AIR in public forums through speaking and writing.
While at the FCA, Nick chaired the Global Financial Innovation Network (GFIN) and IOSCO’s FinTech Network. He is a Certified Chartered Accountant with 9 years of forensic investigative experience at the both UK Financial Services Authority (FSA) and KPMG. Prior to his innovation-focused roles, he investigated regulatory breaches in his time in the Enforcement Division of the FSA and conducted civil, criminal, and regulatory investigations of fraud, misconduct and other matters for private clients at KPMG.
Nick is also the founding Director of Sandbox Consulting Ltd, a UK-based boutique providing strategic advisory services in innovation, transformation and regulation in the financial services and public sectors in the UK and globally.
Nick describes himself as a technophile, is passionate about wellbeing and mental health, and is a father of two, coach to an under 10’s soccer team (or football as Nick would call it) and a keen road cyclist, having taken up the sport in the first Covid-19 wave in the UK.
We have wonderful episodes coming up. We are going to have Congressman Bill Foster back on the show, talking about what’s happening in Congress, and what should be happening on issues like digital identity. We’ll have fascinating conversations with Soups Ranjan of Sardine, talking about fraud; with Jane Barratt of MX; and with Google on our second paper with them on Model Risk Management (MRM), focusing this time on AI.
It was so good to see so many fans of the show when I spoke at FinTech South in Atlanta last week! I look forward to seeing more listeners in September at FinnovateFall, and of course, at Money 2020.
Please be sure to leave us a five-star rating on your favorite podcast platform so more people can find Barefoot Innovation, and please also find me on social media to continue the conversation!
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