Tactic 1. Involve Compliance, Security and Risk from day one
An often-heard stance of Innovation Units is to keep Compliance, Security and Risk out as long as possible as they limit the creative process by imposing unnecessary barriers. However, it actually increase the chance of adoption success if you involve them right from the ideation phase. These departments can often help you understand the important requirements for the future and how to engage regulators on this journey. This prevents the Innovation Unit from spending a lot of resources to find out later that the chosen direction is impossible.
Note, however, that it is time well-spent to first educate these departments on the innovation process and the steps to be taken before involving them in your creative sessions. In this way, they are enabled to help you realise your goals more effectively and efficiently.
Tactic 2: Discover the possibilities of involving and collaborating with regulators
For some experiments it may be useful to use the regulatory sand boxes that some local regulators offer. In the Netherlands, the AFM (Authority Financial Markets) and DNB (Dutch Banking Authority) created such a sandbox to offer more room for innovation by enabling financial parties to roll out innovative financial products, services or business models(a). The sandboxes provide market players the opportunity to experiment whilst not being fully bound by regulations. DNB and AFM’s point of view is that they’ll focus on what rules are actually trying to achieve instead of applying unnecessary barriers.
Tactic 3: Start with public and anonymous/fictitious data to build a business case
Naturally, in the early stages of innovation, a lot is unknown and uncertain. Whilst this phase feels comfortable for innovators, regulators, business units and departments concerned with compliance, security and risk, generally feel less comfortable in this phase. This mismatch might lead regulators and the aforementioned department to raise barriers for the Innovation Unit.
One approach that has proven useful is for the Innovation Unit to do the first experiments using public and/or anonymous/fictitious data. In our experience, this is often just enough to create a first idea of the viability (mainly the technical operability) of a new proposition without being subject to too much regulation. With the obtained results, effective discussions can be held with the business units and the departments Compliance, Risk, Security and possibly with the regulators themselves.
This approach prevents discussions based on hypothetical situations and replaces them with worthwhile discussions. It especially helps to prepare the organisation and its regulators for the future when the new proposition and its business case is validated and ready to go live. By taking a “start small” approach, innovation and regulation go hand in hand and create an environment where innovations create value for the customer whilst keeping up with regulations.