The first company portrait in our FinTech series features the Zurich-based Apiax, a so-called RegTech, which uses technology to help banks in mastering the regulatory challenges of the financial industry.
SESTA CISA AMLA FINMASA – whatever could it mean? A Latin proverb, a wizard’s spell from Harry Potter, a brand of luxurious toiletries? Nope, not even close, they’re abbreviations of the main laws that govern financial services in Switzerland. Right up there with FATCA (from the United States), MIFID II (European Union), WpHG (Germany) and many more, they regulate who can invest what, how and where. Together they make a maze of rules, written in finance-speak, regularly changing and…watch out! They’re armed with stiff penalties: according to Bank of England Governor Mark Carney, banks worldwide now pay US$ 320 billion every year in non-compliance fines.
Banks spend huge sums in compliance
Avoiding the fines, playing by the rules, takes time and talent. That equals money: European and American banks already spend 4-5% of their revenues on compliance, say various surveys. Those costs are rising sharply, say the same surveys, some predicting up to a doubling of expenditures over the next 5-10 years. It’s this wall of costs that Fintech-startup Apiax hopes to climb.
Guiding investors through the regulatory jungle
Apiax aims to automate compliance on the broker’s desktop. Is the Dutch client allowed to purchase that fund in Italy? What are the tax implications of the Swiss investor trading US bonds? Was the British buyer adequately informed about the deal in Hong Kong? Mouse-click, mouse-click, mouse-click and answer – that is the goal. “Our software is aimed at giving a client an after-tax cash return on possible investments,” explains one of Apiax’s Co-founders, Philip Schoch, “at the click of a button.”
Reducing the human cost
Just as Google automated search and Expedia mechanised travel-booking, Apiax is computerising compliance. The idea is not just to be cheaper and faster, but also proactive. Sellers and buyers prefer to know all relevant regulations up front. It’s no fun to find out – after the fact – that a customer in Country A faces a whopping tax bill for buying a security in County B if the levy would have been much less had he bought it in Country C. It’s not that banks cannot do this today. They can, but it doesn’t come cheap – lawyers and tax cracks never do. Smaller, everyday transactions don’t justify the (human) cost.
A software bundles the right information
Apiax’s main technology is that of APIs, application programming interfaces. These are software messengers that, in this case, collect regulatory information and present it to investors or their advisors. Apiax writes APIs, and with the input of tax/legal experts it also organises regulations such that APIs can find the right information. Indeed, the name Apiax is a conjunction of API, its main technology, and the slang expression of ‘ax’-ing for information, in this case regulations.
Which brings to mind another incantation: PECUNIAM ET LEGEM. This really is a Latin proverb, meaning ‘obey the law and make money’. For Apiax, it’d be a fitting motto.
Julius Baer and FinTech
Will robots ever take over the jobs of relationship managers in the private banking industry? Only time will tell. At least for a bank like Julius Baer, where the human factor is a key element of its service model, the prospect is rather unlikely. But this doesn’t mean that technology is insignificant. On the contrary: without cutting-edge IT, a bank like Julius Baer couldn’t cater to the very complex needs of its clients. In order to push the technical boundaries even more, the Bank joined the F10 FinTech Incubator and Accelerator Association in October 2016, supporting promising start-ups from across the globe on their way to innovate the financial industry. In our ‘Insights’ section, we will cover the progress of this initiative regularly and talk to movers and shakers of the FinTech scene.