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Trust makes the digital world go round

Published By Donald Gillies: 18/07/2018

Founders Donald Gillies and Henry Irish explain how PassFort is solving today’s compliance problems and tomorrow’s trust challenges.

When we were turned down for a bank account in the very early days of our business, we saw it as less of a setback and more of a confirmation that there was an undeniable need for what went on to become PassFort.

Back then, we had set up a company to build a transaction monitoring system for the blockchain. While blockchain wasn’t yet a buzzword, it was clearly a red flag for mainstream banks. Even though we were a software company and not involved in handling cash or cryptocurrencies, describing what we did on application forms as ‘blockchain activities’ was enough for banks to take fright. To them, this was a shady world of illicit business and money laundering, so it was simply easier to say ‘No’ than find out exactly what it was we did.

Dejected, we went to what was then the new challenger on the block, Metro Bank – and opened an account the same day.

It’s a story that neatly illustrates the kind of problems we are solving at PassFort, as well as highlighting the enormous disruptive forces at the heart of the digital economy.

Computer says no

Firstly, our experience highlighted the difficulty financial institutions have faced in dealing with increasing complexity. We kept on seeing examples of established companies struggling with essential processes like onboarding from a compliance perspective. For anything outside a narrow ‘norm’ of acceptable risk parameters, the cost of serving a new customer went up and saying ‘No’ was the simplest, most cost-effective solution. In our case, the bar was set arbitrarily high by all the banks we approached apart from Metro Bank.

That way of doing things might have been OK when ‘unusual’ cases like ours were the negligible exception. But now it means excluding ever greater swathes of potential business, from growing global markets. The speed of cross-border transactions becomes critical as business becomes more digitised and complex.

The infrastructure of the old economy no longer cuts it. Industries are now having to figure out how to restructure entire operating models so they can do business in this new world while meeting the rising compliance demands it brings.

Nimble challenger startups are capitalising on the opportunity to offer the kind of digital convenience customers expect and businesses need. The upstarts are eating the big players’ lunch.

Except we don’t think it’s as simple as that.

PassFort’s Smart Policy framework was designed to address the changing compliance demands businesses face today. It allows organisations to digitise paper-based, offline policies into a single, seamless, scalable compliance operation. It gives compliance professionals and tech teams dashboards and tools to automate processes in a modular, customisable way.

But we also see this as part of a bigger solution to a bigger problem. We are developing PassFort to provide an entirely new kind of infrastructure that meets the demands of industries feeling the pressure of technological disruption and the insurgent challengers doing the disrupting. We don’t believe it’s a case of startups sweeping away the incumbents, or of those incumbents becoming extinct. We do believe there are significant challenges facing both the old guard and the new.

Big and slow vs small and quick

Until fairly recently, the major high street banks were the point of access to the economy for both individuals and businesses. However, the scale that once made them dominant now slows them down. Where once they could simply throw more people and money at something like compliance, now they need to reduce costs while the regulatory challenge itself only grows.

Markets have become more competitive as new business models in the online space eat into the profit margins of the big financial firms – and those of pretty much every other sector, too.

But these new challengers don’t have it all their own way. They tend to burst onto the scene only to discover that in order to grow they have to become more grown-up and professional, with regulators, platforms and established partners to satisfy.

PassFort delivers value to large corporates by automating what are otherwise people-intensive, expensive processes. For the challengers, our technology enables them to operate at scale, across different jurisdictions, and to launch new products with confidence.

This is compliance as a competitive advantage, not a box-ticking burden. It allows organisations to think in new ways about how to get closer to their customers and create better, frictionless experiences.

Our software is intelligent, too, so it learns from the data it handles, deriving insight to apply across different customers and replicating human behaviour to further automate processes and increase the accuracy of decisions.

Building real trust in a networked world

At PassFort, we are using technology to solve the very real problem faced by organisations now. We’re helping them address the need for compliance to be part of the fabric of their operation in a digital, data-driven world.

But we think this new world is now being shaped by a bigger, more fundamental shift – one that is driving the next phase of our business evolution: The very nature of what it means to trust someone is fundamentally changing. In the old world, trust was often established by proxy, through large institutions – your bank, the university you went to, the company you worked for. These were the attributes that verified your identity to anyone that didn’t know you.

Now they are among countless potential ways for us to validate who we are in the online world. Exactly what constitutes a trusted identity in this space is still being defined but its importance in the digital economy is obvious. Ever-growing volumes of data exist that define us as individuals and describe our behaviour. Concerns over privacy and data protection are affecting the way such data can be gathered and used.

Similar challenges exist when it comes to trusting organisations. Onboarding and serving enterprise customers becomes more complex with 24/7 digital business models that span different territories and regulatory jurisdictions.

Making sense of all this constantly changing information in a way that allows trust to be established and to flow easily throughout the network is the challenge we have set ourselves.