• November
  • 2021

How to Ensure that Your Digital Financial Experiences are Compliant with the Regulations and Transparent?

The financial services industry is notorious for regulatory constraints slowing down innovation projects and putting downward pressure on the profit margins. However, these regulations are critical to building a healthy, reliable, and trustworthy financial system. Whether you represent an incumbent financial institution or a FinTech, it is essential to consider regulatory requirements while choosing a tool to shape your institution’s digital capabilities. At Kidbrooke, we have always been mindful of regulatory challenges faced by the industry: the idea of OutRank, our financial simulation engine, stems from MiFID II/IDD transparency regulations. Today we will examine which transparency factors make a difference when selecting financial analytics running digital and hybrid customer journeys.

The absence of conflicts of interest is critical for providing quality wealth management services for your customers. Therefore, it is essential to ensure that the solution supporting your decision-making is independent, objective and auditable. OutRank achieves this by using a utility-based methodology, which maximizes the value-added for the given customer by a particular financial alternative. As a result, any financial advice formulated by our simulation engine would be compliant with this requirement by design.

The regulations shape the way financial businesses operate, and therefore it is vital to examine whether the considered product or service supports your business model. While some simulation engines cater to only guidance or advice financial journeys, OutRank is flexible enough to cater to the regulatory framework of your choice – or even a combination of them! For instance, one of our customers, one of the largest insurers of Sweden, has recently released an investment guidance journey with an option to switch to regulated advice in case the end customer needs their support.

Regulatory reporting is an important area to consider when it comes to using innovative technology in your offerings. Some of the solutions may deliver acceptable results but lack auditability, interpretability, and transparency. At Kidbrooke, we designed OutRank to support a full audit of outputs back to fundamental assumptions and configuration, ensuring that your compliance team can examine every aspect of the automated decision support at request. Additional parts of the service include monthly maintenance of the calculation engine and its annual validation, which can significantly shorten compliance and NPAP processes and allow fast and easy internal adjustments due to the transparency of the model.

The differences in regulations and tax regimes make international expansion ever more challenging for financial businesses. Thus, it is good to approach selecting your financial analytics provider with a long-term perspective and ensure that it supports your roadmap. Kidbrooke strives to make this process as seamless as possible by adding comprehensive tax logic to OutRank’s simulation capabilities. This means that across the simulated scenarios, you will get information about projected returns and learn about the tax implications of each simulated path. What is more, it is possible to model any required tax domicile at request, so you would not need to be on the lookout for a new provider in the target country.

Despite the industry-wide focus on digitalization, trust and transparency are core values of the financial industry and are crucial elements of the modern customer experience. Therefore, whether you decide on building a fully automated self-service financial journey or a hybrid one, it is paramount to consider the auditability, independence and flexibility of the financial analytics driving your offerings. A carefully selected solution can significantly cut the compliance expenditures, allow for quick and easy internal adjustments at each point of your journey and even simplify your international expansion.

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