Have banks gone too far seeking to appease regulators by avoiding any clients deemed risky?
Probably! However, given the way regulators have clamped down on the banks, who would blame them. Technology, along with appropriate other control mechanisms, does offer a way of allowing balance to be restored. Being able to capture and analyze more information in a much more granular manner should allow banks to make more informed and detail-orientated decisions about risky clients.
Technology allows for enhanced monitoring not only of clients and their transactions but also of the banks themselves - allowing risk decisions to be reevaluated at the earliest sign of trouble, and importantly, enabling banks to take action before regulators get involved.
Using technology and data effectively can therefore provide a bridge for banks who seek a more balanced approach to dealing with riskier clients.
Popular though it has become to bash banks, they have been acting rationally. The blame for the damage that derisking causes lies mainly with policymakers and regulators, who overreacted to past money-laundering scandals. They issued dire warnings about the dangers of serving entire classes of client, such as money-transfer firms, and imposed swingeing penalties for infractions. No wonder banks dumped less-profitable clients tainted by the merest hint of risk. Financial technology offers the prospect of filtering suspicious transactions from legitimate ones.
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