Ensuring compliance in highly regulated sectors with the help of digitalization

zeb: Mathias, to introduce your company can you please elaborate on the main pillars of your business model?

Mathias Wegmüller: Qumram is based on three pillars: Risk & Compliance, Operations and Sales & Marketing. With Risk & Compliance, we protect financial services firms by recording indisputable evidence of all digital interactions, across all channels. Operations, on the other hand, includes preventing both internal and external fraud, and reducing the cost of mitigating operational risk. Finally, Sales & Marketing aims to increase revenue and customer satisfaction, through fast struggle detection and customer behavior analysis, leading to improvements in customer experience.

Technically, Qumram addresses Regulatory Compliance and Digital Transformation for financial services institutions. At its core, Qumram’s software records every interaction (tab click, mouse movement, keystroke or URL click) on any digital channel used by our clients to interact with their clients and prospects. These recordings are stored in a highly compressed and compliant form. They are available for regulatory purposes, as well as internal use for controlling and reducing costs and increasing profitability. Regular weblogs contain a lot less data than a Qumram recording. As weblogs are always only a server-side log, they are incomplete, and tell only half of the truth. In comparison, Qumram records both server-side and client-side interactions, so recorded data is inherently much richer, accurate and compliant.

Though your solution is applicable to any industry. Why did you decide to position yourself as a FinTech company and did this decision have any impact on your business?

FinTech was the obvious starting-point for Qumram, because our solution is unique in its ability to ensure compliance in highly regulated sectors—and being one of the most regulated industries of them all, Financial Services offers the potential for us to make the greatest impact. In other sectors, 96% capture is good enough to analyze generic trends in user behavior, customer journey, barriers to conversion, etc.—however for compliance purposes this is not viable.

What are the specific challenges when it comes to digitalization in banking?

To comply with regulations, banks must record all interactions with customers across all channels. Not only that, but they must archive these interactions in a fully accessible form in order to comply with regulatory requirements, e.g. MIFID-II, FFSA, FIDLEG, SEC 17a-4 and others. The quantity of data collected is substantial, as banks must store this big data for five, seven or more years for compliance. This provides a huge opportunity for banks to analyze this data, identify behavioral trends over time (over the lifecycle of the customer relationship), and evolve to the point where they can use predictive analytics to grow revenues and increase customer satisfaction.

The maturity of digitalization of the bank is definitely trailing behind other industries like retail, gaming or gambling. This is evident simply by comparing the performance of websites and mobile apps. However, digitalization is mainly about customer centricity and who owns the customer interface, so the banks must get on board quickly if they are to continue meeting customer expectations. In the past, compliance has been a barrier, but that is now no longer the case. Qumram allows banks (and the Regulator if need be) to see exactly what the customer saw, beyond any doubt. Therefore, it provides great insight into the customer experience and is guaranteed to be compliant.

With Qumram, how is additional business value generated for banks from data collected?

When it comes to analytics, Qumram offers two solutions.

First, we can feed recorded data into data lakes and specialist analytics tools such as Splunk and Tableau, which are used by banks to conduct the reporting and visualization of structured business data, as well as weblogs. So we can leverage existing investments and integrate Qumram data feed into existing systems. Our main value add—besides being a source of new, unique and valuable user behavioral data—is to structure them into a form that downstream analytics products can interpret.

Second, we can also perform basic analytics within Qumram, including Standard Web KPI reports or Standard Web Analytic Dashboards. In this case, we record web or mobile transaction platforms, such as e-banking or e-trading. Here, the banks prefer not to use Google or Adobe Analytics solutions, because they want to retain data on site, rather than in the cloud.

Regarding data analysis, were you able to identify additional business cases that are not part of your solution so far?

Yes indeed. The exciting new business case comes into play when using behavioral data to predict future actions and tailor content and offers according to these predictions. The result is a self-learning, self-improving web presence, which refines its knowledge of the user and his or her preferences over time, thereby improving the accuracy with each visit. This enables financial services firms to customize product and service offerings, and to adapt them to meet individual preferences.

Which hurdles have you faced when implementing your solution so far?

Although different regulations apply in different countries—MIFID II in Europe, and SEC17a-4 and the Department of Labor fiduciary ruling in the US, for example—the fundamental requirement to record, archive and retrieve customer interactions to prove compliance and mitigate conduct risk are common themes. So legal variations across different countries have not been a challenge. The greatest hurdles faced so far include:

  • Banks believing that their digital business is compliant, when in fact it is not. For many banks, their legacy systems are their burning platform, because they do not record 100% of all interactions, they are insecure, and simply not compliant.
  • Concerns over data privacy. There is a legal requirement for financial institutions to be able to prove all interactions with clients—so they have to. In fact, we have reviewed all aspects of our solution with data privacy and security specialists from Gartner, and other similar organizations, and they confirmed that our solution does not compromise customers or employees.

As a global start-up founded in Switzerland, how did you have to adapt when entering new markets?

Strategically we decided to go to market in the UK and the US first, after becoming established in Switzerland. In the UK, the adoption speed of new technology has been incredibly fast over the last few years. The investor-friendly climate, the appetite for innovation, and the great support of the Regulator are the main drivers behind this acceleration that we see in London. Many global players are driving their innovative digital projects in the UK first. The US financial services sector has lagged behind Europe in terms of digitalization, however there is great momentum to “go digital” and given the scale of US regulation, there is a major need for our solution. Qumram’s track record in Switzerland is very reassuring for US firms wanting to drive forward with their digital projects.

In Germany, Qumram is beginning to gain more traction. We see similarities between the needs and desires of Swiss and German financial services firms, although Germany is obviously a much larger market. We will be extending our strong local partner network into Germany to accelerate market entry.

Finally, regarding the story of Qumram, what advice would you give somebody who is about to launch a FinTech company?

Start with the basics, classic advice holds true in FinTech, as it does in any new business: define your markets, do your research, find a real business need, understand what messaging will resonate, produce a minimal viable product (MVP), test it, pivot, test it again—and stay focused. Find a first customer and then a smart business angel who provides the necessary liquidity for the first few iterations. Think big and think global right from the start.

My personal advice: test your own risk appetite, your entrepreneurial personality and your closest family situation. Because there will be lean periods, and long days, throughout your journey. You will no doubt need strong spirit and the support of all who surround you to overcome the many (un)necessary struggles associated with building your first start-up. If you are up for the challenge, then go for it! It is the best business journey I have taken in my 18-year long career.

Mathias, thank you very much for this interview.

Further information on Qumram can be found on the Fintech Hub by zeb.

Feel free to contact us!

Author Sebastian Hätälä

Sebastian Hätälä

Manager Office Münster

Michael Hönig

Manager Office Zurich

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