August 18, 2023
I’ve been an admirer of the regulatory innovation work of the U.K.’s Financial Conduct Authority since its earliest days. I watched the FCA stake out a leadership role as the world’s most tech-forward financial regulatory body, along with the Monetary Authority of Singapore (which started its innovation initiative around the same time). Last December, the FCA’s CEO, Nikhil Rathi, joined us as a guest on the show. And then this summer, I talked with the current leaders of the FCA’s innovation program, who shared their progress in taking the agency to new heights.
Today’s guests are Jessica Rusu, the FCA’s Chief Data, Information and Intelligence Officer, who took on this role in 2021, and Nathalie Lowe, the innovation group's Chief of Staff.
I am incredibly impressed by what they are doing. We at AIR work with regulatory innovation programs throughout the world, and I think the FCA’s work is the model of what everyone is – or should be – striving toward. They are actually realizing the dream.
And here is a crucial thing about it — the thing I hope all the regulators in the audience will take away from this show. Most of the “innovation” programs launched by regulatory agencies are outward facing. They focus mainly on “fintech,” on understanding how new technology is being used by the regulated industry and on creating channels for communication. That’s where the FCA started, too, launching its Innovate initiative and its famous, first-in-the-world regulatory “sandbox” way back in 2016. Unlike most agencies, however, the FCA’s innovation work is also inward- focused, aimed at changing the agency’s own technology and, more deeply, its own culture. The FCA has been figuring out how to make itself into an innovative organization.
To that end, they supplemented the fintech initiative with a “regtech” unit, under the leadership of Nick Cook (whom I'm proud to say is now our Chief Innovation Officer at AIR). That team addresses both halves of “regtech” i.e. regtech tools for the industry’s use in compliance, and also regtech for regulators, which has come to be called “suptech,” for supervisory technology. This means that the same agency people who are deeply understanding industry innovation are also developing innovative tools for themselves, as regulators. That, in turn, has led to an ever deeper rethinking of their own approach to their work.
To keep pace with the technology transforming the financial sector, regulators are going to have to transform their own technology too. This is more fundamental than even creating good suptech tools. It’s about the underlying IT of the whole agency and, even more so, about the human organization, itself.
What does this take? A lot.
For one thing, agencies need to convert from on-premises IT to cloud computing. They need to do both supervision and overall market monitoring in a data-centric way. They need to bring together vast volumes of data — structured and unstructured — and become data-centric organizations. They need to get all the information into digital form, so they can ingest it and use it however they need. They need to move from relying on small sampling of data to working with complete data. They need to shift from using lagging data to real-time data, or near it. They need to build interoperable systems that can share data with other entities when appropriate. They need to leverage the explosion of available data by analyzing it with AI tools like machine learning (ML), natural language processing (NLP), and now, generative AI and large language models (LLM). They need to distill all the information they have into, among other things, risk dashboards for every firm they oversee. And they need to monitor the whole industry, including through external data, so they can spot early signs of illegality or emerging risk.
The FCA today is doing all this, and more.
Jessica and Nathalie share the story. The agency finished its migration into the cloud this year — more on this, below. It is using a growing set of AI analytical tools to pull meaning from the massive digital data they’re pulling in. They have created a common platform with their counterpart prudential regulators at the Bank of England, who look at the same firms from other risk angles.They have created a data-driven “single view of the firm,” so they can see dashboards of the condition and risk indicators of the entities they oversee. The suptech team is organized to have different portfolios of data, so that people see different key risk indicators based on what they’re looking for. The system also lets them pull historic data, whenever they need it. Meanwhile, supervisors can use NLP to search social media and open source data to, say, explore a hypothesis that a given firm may be engaged in misconduct.
In our conversation, Jessica and Natalie describe how the innovation division is structured and staffed — moving from 350 to 450 people, with more growth planned. They discuss how they’re approaching transformative technologies like AI, quantum computing, and blockchain.
They also talk about their amazing work in techsprints — remember, it was the FCA that invented the regulatory techsprint. Right now, they’re planning a global sprint to address the growing “greenwashing” phenomenon in which companies make unfounded claims about carbon reduction and other environmental benefits. Our discussion also has an update on the evolution of their sandbox work into a Digital Sandbox in which innovators can test ideas using synthetic data.
Please pay special attention to the show’s section on the migration to the cloud, because it’s a critical topic that gets far too little discussion. Jessica says they made the decision to exit the data center in 2019 or 2020, before her arrival, and finished the conversion to the cloud this year. She talks about the huge advantages of the move, while noting that understanding the need still “doesn’t make it easy” to do. For one thing, they needed to equip the agency with full competency in engineering and core technology skills. I think every financial regulator needs to be already on the cloud journey, or at least planning for it, and will benefit from the FCA’s experience.
Jessica and Nathalie are especially compelling in talking about the FSA’s work on its own culture, which Nathalie calls a sea change, flowing both top down and bottom up. They talk about the secrets to making this work (including that, for them, they have may have benefitted from having their office located on the site of the London Olympics).
I was in London when we recorded this episode but ended up having to record it by phone (I apologize that it has a few issues with sound quality). However, I had also recently visited, and happened to catch them on a day when they were celebrating the 10th anniversary of the FCA. They were holding their famous Data Week event, extra special this year for the 10-year milestone. Data Week is an agency-wide learning forum open to all employees. The concept is that, since most regulatory personnel will probably never go to a tech conference, the FCA brings the tech conference to them. Employees choose the sessions they want to attend, and the turnout is absolutely huge. The team works hard at making the information compelling and fun, with topics ranging from understanding statistics by discussing footfall data to, once, showing a deep fake video purporting to be the agency head doing a standup comedy routine.
The day I was there, they featured a talk by Neil Martin, who has pioneered using statistics in Formula One racing. The auditorium was packed. I’ll put some pictures in the show notes, including the sign saying, “We Love Data.
Every regulatory body in the world can learn from what the FCA is doing. I am someone who has spent years advocating that agencies take these kinds of steps — here is my 2020 paper on the Regtech Manifesto and my series of papers from my 2015-17 Harvard senior fellowship. For me, it’s almost overwhelming to see an agency that has actually built the new model we need for financial regulatory oversight for the digital age.
Jessica joined the FCA as Chief Data, Information and Intelligence Officer in June 2021. She leads the transformation of the FCA’s ability to analyze and use the data, intelligence and information it receives to effectively oversee the 50,000 firms it regulates. Jessica is building and evolving agency relationships with big tech companies, fintechs and the wider data science community.
Jessica was previously the Chief Data Officer of Chetwood Financial limited, a digital native, start-up bank, where she spearheaded the use of machine learning. Before moving into fintech, Jessica was Senior Director of Finance & Analytics at eBay in Europe, where she built out their advanced analytics and customer insight function.
She previously worked in credit analytics at Ford Motor Company and Stress Testing at GE Capital. Jessica has a degree from Penn State University in Management Science and Information Systems and an MBA from the University of Michigan. More recently, she completed the Oxford Said Business School’s Artificial Intelligence Programme.
Nathalie Lowe is Chief of Staff – Private Secretary for Data, Technology and Innovation at the Financial Conduct Authority. She is a member of the senior leadership team overseeing 500 colleagues.
Nathalie has had a long career in technology project management, with extensive experience in strategy development, execution, organizational design and creative problem solving across multi-functional teams. She is a strong advocate for fostering inclusion and technology skills, passionate about supporting programs designed to help young people from diverse backgrounds in the U.K. pursue careers in the technology sector. She believes the UK can lead the way in areas such as artificial intelligence and needs to engage as many people as possible to have a stake in shaping the future.
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Our podcast queue is bursting with great new shows. We have an episode coming up with Jason Cave from the U.S. Federal Housing Finance Agency, talking about the recent TechSprint that FHFA hosted on how to improve the mortgage process. AIR had the honor of working with them on this — you can find information on our website. We will have a second, incredible show with Lisa Rice from the National Fair Housing Alliance, and a second show with Paula Hunter from the Mojaloop Foundation. If you missed hearing our 200th episode, please do check it out, and watch for a follow up show that will dig more deeply into the key themes our guests have raised over these last hundred shows.
Meanwhile, our AIR team has multiple TechSprints in the works, including one on generative AI and a second in our series with the U.S. Department of State on anti-corruption. We also just put on a sprint with the Cambridge Centre for Alternative Finance, on how regulators can use chatbots not only to handle consumer complaints, but also to use the resulting data to understand where markets are exhibiting abuse and illegality.
If you’re based in Washington, DC, or can be here on September 6, please come to AIR’s Regtech Expo on Capitol Hill. We’ve invited a group of regtech firms and some regulatory agencies to demonstrate how technology can transform the tools for managing risk and noncompliance, in areas ranging from fair lending to fighting financial crime.
September will be the start of the fall conference season. I’ll be speaking at #HOUSINGDC23 with Jason Cave of FHFA and Faith Schwartz of Housing Finance Strategies. I’ll be in Philadelphia speaking at the Financial Health Network’s EMERGE Insights 2023. In October I will be in Las Vegas doing two panels at Money 20/20. I’ll also be at the Singapore Fintech Festival in November, and much more. I hope I’ll get to see many of you face-to-face in my travels.
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