New entrants in the banking sector can lay the groundwork for the future while demonstrating to regulators their dedication to implementing the elements necessary to enhance their customers' financial health through advanced technology.
FREMONT, CA: Digital banks and other FinTechs are arising as more agile competitors to traditional banks. Digital banks on their way to becoming chartered as they have the chance to set up fully automated procedures and systems without the impediment of legacy systems.
As essentially greenfield sites, digital banks have the opportunity to avoid manual processes for several business operations, and regulators actively discourage them from doing so for regulatory reporting obligations. Instead, banks trying to seek a charter must demonstrate a substantial risk and regulatory reporting plan in place and the capabilities to ramp up quickly and scale with rapid growth. For regulators, the ability to promptly incorporate an operational platform to begin a business is critical.
Many newcomers are choosing to implement automated reporting systems to meet regulatory requirements while also gaining significant operational benefits. These benefits include shorter time to market, fewer errors, and lower operating costs.
Areas to Consider
Align Systems Deployment with an Optimal Staffing Model
Like any other early-stage venture, pre-charter banks deal with frequent challenges due to restricted access to valuable resources, and staffing is no exception. As a recently formed digital bank or aspiring bank, the staffing resources may be limited in terms of IT, regulatory, and financial reporting knowledge.
This is where new businesses can benefit from the freedom from the constraints of legacy systems. Those who are constructing banks from the ground have the advantage of following best practices from the start. This includes designing and implementing technology solutions that eliminate the need for current staff to perform manual interventions.
Place a Robust Data Management Framework
To meet the strict requirements of today's regulatory and financial reporting environments, financial institutions must put a solid framework to manage data collection, normalization, integration, and distribution in support of their regulatory reporting obligations.
This highlights the importance of a reliable and industry-proven regulatory reporting solution. Regulators require regulated entities to implement first-rate records-validation functionality to meet their data quality standards. At the start of the platform's ETL (extract, transform, load) data ingestion process, these systems must recognize and filter out data anomalies.