Technology is not just a means to implement regulation/policy. The right technology can help depress costs, reduce risk and increase the confidence of lenders and investors, all of which are of paramount importance in the current economic environment.

Applied inappropriately or neglected and it can contribute to systemic risk, lead to reduced inward investment and ultimately have a detrimental effect on the economy. Technology underpins almost every transaction in the Financial Services system and if regulators/policy makers are to develop effective and durable regulation they need to understand how these institutions (e.g. the banks) operate. It is now fundamentally impossible to do this without appreciating the technology that not only underpins existing banking institutions, but will drive changes to their operations and strategies in the future.

Sadly this understanding is not at an appropriate level (many of the executive agencies and policy makers in this sphere admit to this) and there is little appetite within current regulatory structures to rectify this. Often, technology is seen as an implementation after-thought and consequently there is the significant risk that policy-formulation is not undertaken with knowledge of the ‘art of the possible’.

Fundamental reform to the UK’s financial services system is ongoing, yet there is limited understanding amongst policy makers and regulators of the technology that underpins the entire system they regulate, a potentially dangerous knowledge gap. It is critical that regulators and policy makers are able to understand how technology provides the foundation for the entire the financial services system as we know it and, crucially, what technology can offer to the financial services industry in the future. Such understanding needs to inform all stages of the policy development  and regulatory process so that regulation is more effective, less unnecessarily intrusive and, crucially, more durable.

A continuation of this lack of understanding will also have the effect of restricting the evolution of the financial services industry as innovation is stifled, and/or it will fail to take into account the new regulatory challenges that the development of new technology poses. It is common sense that if a particular industry or utility is based upon the application of technology, as indeed most now are, the regulator needs to have a two-way relationship with industry.

Intellect provides an ideal source of neutral expertise for policy makers to tap into, representing the aggregated expertise of the IT companies that provide the platforms which underpin much of the financial services industry and the functions that it expels. Intellect has strong relationships with a number of regulators, such as Ofcom, Ofgem, Postcomm and others. The question should therefore be asked, why should the financial services industry be any different?

If the UK’s banking sector is to be reformed to meet the challenges posed in recent years, the Government needs to learn from mistakes of past to allow the industry to power a sustained economic recovery. Financial services policy not only needs to reflect what technology can facilitate today, but what it will enable in the future. For an industry like financial services that relies so heavily upon technology, regulation will only be effective and durable if it takes into account how it will be implemented at an early stage in the policy development process.

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