It is becoming increasingly clear that whatever the specifics of the CFPB’s final debt collection rules, technology is going to be critical to the ability to provide compliant services and remain profitable.

So I was fascinated by the announcement by IBM late last week that the company plans to acquire Promontory Financial Group, a global risk management and regulatory compliance consulting firm headquartered in Washington, D.C.

On the face of it this may not seem to relate to the ARM industry. But take another look; this is a very interesting example of out-of-the-box innovation from other industries being applied to financial services. Read the following all the way through. What unfolds, to me, should be a “wow” to collectors, who depend so heavily on manual review and human intervention.

According to the announcement,

Upon close, the capabilities of Promontory combined with IBM's deep industry expertise and Watson’s cognitive capabilities will directly address the massive operational effort and manual cost of escalating regulation and risk management requirements.

More than 20,000 new regulatory requirements were created last year alone, and the complete catalog of regulations is projected to exceed 300 million pages by 2020, rapidly outstripping the capacity of humans to keep up. Today, the cost of managing the regulatory environment represents more than 10 percent of all operational spending of major banks, for a total of $270 billion per year.

This is a workload ideally suited for Watson’s cognitive capabilities intended to allow financial institutions to absorb the regulatory changes, understand their obligations, and close gaps in systems and practices to address compliance requirements more quickly and efficiently.

Upon close, Promontory’s professionals will train Watson, which will learn by continuously ingesting regulatory information as it is created and through interaction in real-world applications.

“What Watson is doing to transform oncology by working with the world’s leading oncologists, we will now do for regulation, risk and compliance,” said Bridget van Kralingen, senior vice president, IBM Industry Platforms. “Promontory’s experts are unsurpassed in this field. They will teach Watson and Watson, in turn, will extend and enhance their expertise...”

Promontory will begin to accelerate IBM’s development and machine training of cognitive solutions for risk and compliance. This includes solutions for tracking constantly changing regulatory obligations, expectations and control requirements, as well as solutions that address specific compliance needs, such as financial risk modeling, surveillance, anti-money laundering (AML) and Know Your Customer (KYC).

Eugene Ludwig, Promontory’s founder and CEO said, “We believe the future of business and regulation will be driven by the need for advanced technology alongside deep subject-matter expertise.”

I agree. And to this end, we at The iA Institute are in the process of forming an Innovation Council to leverage the collective imagination of big thinkers from across – and outside - the ARM industry. The Innovation Council will work closely the Consumer Relations Consortium, also managed by The iA Institute. If you think you can contribute, please get in touch.

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