9 April 2019

18.00: Reporting from Lucy Harley-McKeown

How can lawyers deliver effective change management?

Change management is an essential part of the day-to-day job for lawyers, who are often tasked with being the agents for change within organisations. One panellist notes that there has been a shift; five years ago the words change and collaboration were not used as much. The increase in use of these terms means lawyers must be innovative and agile.

One panellist notes: “We are all, apparently, change managers.” Another makes the point that the biggest challenge to lawyers working in-house is that people presume they are predisposed to change and able to adapt to change faster than other people. Lawyers have to make key stakeholders know that they are happy to support them through a change, while making clear their role isn’t a catch-all.

Another point that was noted was the fact that legal picks up on the impact of changes in things that are non-legal, which have an affect on the wider business. The team has to be susceptible to macro and micro changes in an organisation. Important things to take into consideration when managing change in small legal teams were as follows:

    • Lawyers must understand the business
    • Make sure the team has a sense of vision and purpose
    • Add value at a strategic level
    • Get resource modelling right
    • Resist bringing in contractors

Where does it go wrong?

Things go wrong for lawyers when it isn’t clear who is doing what. Managers in legal functions have to let their team know when to escalate an issue, and equally when not to take on an issue as their own. Legal should facilitate the needs of the core decision maker. One panellist says: “At the start of a project you have to emphasise what your lawyers are there to do, particularly when you bring help from outside. You have to ask the questions: What does success look like? How is legal going to contribute? What value has legal added?”

An answer to stop legal taking on too much was the suggestion of using scoping documents. One panellist says: “Having a scoping document is key – one of the main pitfalls that legal functions face is resourcing and this can help keep that at bay.”

17.30: Reporting from Lucy Harley-McKeown

Open Banking: a year on, what has emerged from PSD2? 

A year on from the “industry-shaking” PSD2 (the new EU Payments Services Directive), the panel is not so sure that the regulation has so far lived up to the hype. The pace of change has been slow, with many large banks still in the testing stage for products. The consensus is that a lot of companies are working on this under the radar, and testing is in full swing on lots of products, however there hasn’t been the ‘big bang’ regulators might have hoped.

One panel member notes: “Research has shown that only 1 in 4 people know about open banking and only 1 in 5 knows what that means. We are still waiting for the Netflix of the payments world to emerge.”

Some companies are attempting to gain market share; notably Yolt, with an AISP model. Despite this a lot of the general public haven’t taken up on these kinds of services where they are available. There is bound to be a larger uptake down the line when there is more choice, more visibility and greater competition.

The current market incumbents are banks and fintechs, however until these products are delivered by companies the size of Barclays and Lloyds then there won’t be enough uptake to make an impact. The discussion moved on to the collection of data and how new products use screen scraping. One panellist notes: “The best thing that could have happened would be to drop all mention of screen scraping. No company that uses screen scraping will be able to develop a product that is attractive to the consumer.”

The general consensus was that screen scraping isn’t productive and that it’s better to invest in a proper and robust API model and invest in core platforms. A good note to end on was the suggestion that Britain’s post-2008 banking rules have encouraged other countries to look at how their financial sector is run. In terms of the UK in relation to Europe and the rest of the world, it’s worth saying that PSD2 has prompted change in other countries. One panellist notes: “Canada and Australia are now looking at open banking. We have a role to play in being an example in other jurisdictions.”


15.20: Reporting from Cristiano Dalla Bonna.

LawTech: Is it worth the risk?

Cost pressures and tighter resources are leading in-house units to rethink their internal processes through the use of technology. But in an ever fragmented environment, how can you best manage the risks associated to acquiring and implementing new tools in large organisation?

Post Office legal director Ben Foat, HSBC chief operating officer for Europe legal Rhian Bliss and Euroclear Group head of legal risk Tatiana Johnston set out to discuss the question in a conversation moderated by EY Law legal risk director Matt Whalley.

The first thing to do is knowing what problem you are trying to solve. A useful way to start is looking at existing internal resources, rather than resorting straight away to external providers. HSBC’s Bliss said she created a legal services catalogue that looks at what tools they already have and what is the best outcome they can achieve.

When the problem is defined, it is time to think about how to implement the right technology and ponder what are the risks associated with the process. “It is worth to have a risk management perspective,” Euroclear Group’s Johnston said. “This means speaking to risk managers both about how to manage the risks of implementing the technology and also what risks you could be able to mitigate through a new system.” For instance, it is helpful to apply automated solutions to areas affected by risk, such as contract management and production, especially when compliance pressures on the legal function are increasing.

In addition to the risks entailed, there are challenges for in-house teams in putting together a business case for new technology. Panelists suggested having an ongoing conversation with IT professionals and engaging stakeholders during the process. 
“If this is the first piece of legal tech, people will be resistant,” Foat explained. “There is a whole cultural angle about on-boarding and the stakeholder management piece should not be undervalued.” The other vital step is clarifying returns on investment.

Bliss shared her anecdote of once joining a startup that “just did not start up,” she joked. This sparked a conversation around the Silicon Valley motto “fail fast”. Is there room for failure in a big corporate environment? Tatiana Johnston from Euroclear said that large corporations cannot afford to lose too much. In-house teams need to be careful in managing risk. This means also learning quickly from mistakes and ensuring they are not replicated. However, Foat pointed out, sometimes the best business cases are born out of incidents.

Along the transformation journey, the strategy should be to think about technology as one element among many others. “You need to build foundations around things like e-billing and document management. Find the problem, modernise the infrastructure and then transform. When you get there, you might as well think about technology.”

There were opposing views on how best in-house teams can work on technology with law firm panels. While some panelists said it is inevitable that law firms need to foot part of the bill, others said they would never buy a piece of technology from a firm — their job is giving good advice. The only scenario would be if they came up with a single solution that the client can use to collaborate with all the firms in its panel.

However, they agreed that there is still nothing revolutionary about the technology used in-house. “The real revolution is changing cultural and people views,” Foat said. “Our skills have evolved over last decade.”

Eventually, moving to more ambitious technology like artificial intelligence and cloud computing will be inevitable. And it is likely that a new set of questions will arise that has less to do with costs and more with the moral issues around how the technology is used — especially when customers are involved.

“Depending on our progress, the reasoning will go from budget to ethics,” Johnston said.

14.30: Reporting from Cristiano Dalla Bonna.

Defining a vision for the future of FinTech in the UK

Monzo’s Dean Nash

During The Lawyer’s In-House Financial Services Conference, a panel discussion focused on how to define a vision for the future of fintech in the UK.

Eoin O’Reilly, head of legal compliance at Market Invoice; Simon Coles, GC at Capital on Tap; Dean Nash, GC at Monzo; Leah Moon, legal director at Seedrs, took part in a conversation with Linklaters global co-head of fintech Harry Eddis.

The uncertainty around Brexit is certainly impacting Monzo’s ability to hire talent from the Continent, Monzo’s Nash explained, as there is an anxiety hanging over the workforce that is having a toll both on well-being and productivity. But startups need to focus on their own operational challenges, specifically how to successfully bring their own technology to the market.

This involves two fronts: internal capacity and external development. Internally, companies need to fix their legacy infrastructure to allow scalability, a task that Leah Moon said was carried out at Seedrs to ensure there was the right support around growth. This is the gateway to quickly get permissions and work around the lowest bar to entry in the wider market.

At the same time, they need to find their niche; those customers that are not served by other institutions. Nash explained that, at Monzo, he had to ensure the possibility of getting money onto customer cards and allow top up, which cost £10 per customer every year. He needed to create a framework around safety and regulation from a business perspective — “There is a big trust element to it,” he said.

Externally, companies need to develop a viable product that can be easily changed and adjusted to regulations and technical necessities. Secondly, there is a need for the right business partner, a source of support that can open up distribution networks and drive growth. “It would be unthinkable for us to open multiple branches in every jurisdiction,” says Eoin O’Reilly from Market Invoice.

In this context, support from legal teams becomes fundamental. It has to be plugged in every step of the way and address issues around product, compliance and customer care. To do this, they need to be part of a wider conversation with software developers and users on how best to design the product. Companies have organised hack days to work on technical glitches and process improvement — a way to generate engagement from the workforce.

If fintech companies grow and exit through IPOs and mergers, they need to be in control of their governance and structure. It becomes a complex issue considering that these businesses employ most of their staff on an agile basis. About 50 per cent of software engineers and developers usually work from home. The future of work is not office-based, the panelists agreed.

The issue of fragmentation is not just related to the workforce. The fintech is geographically diverse and involves a wide range of applications. “London is a fintech hub regardless of Brexit and it still brings more VC investments than many other countries,” said Leah Moon from Seedrs. But startups need to find ways to access other pools of capitals flowing, for example, in hubs like the US and Asia.

In the coming years, there is the hope that there will be a clearer legal framework around the development of startups in the fintech area. Panelists agreed on the necessity to elaborate clearer regulatory guidelines on business expansion and governance, mentioning that there is a funding debate going on in the FCA around building a one-stop crowdfunding shop for startups.


13.45: Reporting from editor Catrin Griffiths.

The case for light-touch regulation, from Slaughter and May. As Slaughters partner Nick Bonsall acknowledged in his intro, the title of his address, ‘Reviewing the rulebook – is more regulation really they answer?’ is inevitably loaded. His was a clear argument in favour of proportionality in regulation and how it might feed greater competition in financial services.

In the aftermath of the GFC it was accepted that there would be an unprecedented level of regulatory reform; not only internationally-harmonised measures but domestic protective initiatives such as ringfencing.

The opportunity post-Brexit? How to reconcile the regulatory framework with how firms actually work – and reduce the reporting and information burden.

Bonsall stopped well short of recommending we rip up the current regime. But he did argue that the UK should be looking at how to increase the tailoring of the regulatory framework – albeit with a continuing firm hand on financial stability and with the onus on firms to justify how they might be treated differently from others. It was a strong call for the regulators to use their autonomy in a post-Brexit landscape.

Some of the questions from the floor :

Q: Given the number of new fintech products and services in the market can we really argue that over regulation is stifling innovation?

>> There are a couple of tiers of proportionality under Mifid but there’s more to do in graduating that shift. A good regulatory system should drive financial stability and actively encourage product development by firms without the fears of the sword of Damocles hanging over them. A better tailored approach to proportionality, a driver towards innovation and improving competition within financial services could ensure that positive customer outcomes are more effectively delivered.

Q: Do you think we are likely to see an increase in protectionist regimes?

>> The important thing is to make sure we don’t adopt too much of a protectionist approach – if other jurisdictions do, then we will look more of a business friendly environment.

13.00: Reporting from editor Catrin Griffiths.

Brexit: chaos or good planning? It only took 40 minutes before the morning’s business turned to Brexit. This was a refreshingly granular session with contributions from Credit Suisse, Zopa, HSBC, AIG and Royal London on their preparations.

The big commonalities? First, how the bigger banks had to identify from the outset which banks have to move to other European locations and the differences between divisions in terms of their regulatory treatment and therefore the outcome: global markets and retail private banking on one hand, investment banking on the other.

Second, moving jurisdiction was not nominal: product and IT build had to be incorporated into the planning too so that the overseas entity was properly full-service. Banks clearly don’t want to duplicate resources and want to rely on support functions in London but new entities need to be entities of substance that have ownership of the mandate and provision of service.

It’s been a different story for smaller institutions, who didn’t have the luxury of planning multiple scenarios, had to take a real risk-based approach and be confident of being nimble. But the talent issue has been a headache: a number of challenger organisations have ended up with software development hubs outside the UK.

Some great questions from the floor; here’s a flavour of the answers.

Q: Given that you have all had to plan for hard Brexit, is there a part of you that wants hard Brexit just to make all the effort worthwhile?

>> Whether or not a hard Brexit will happen, the decision to move locations has already been taken. Head offices still want to see London maintain status as a financial services hub, but this is the new normal.

Most banks had to plan for a hard Brexit as worst case scenario, with the legal team having to identify live deals, plan which deals will start pre-Brexit and will continue post Brexit, which necessitated new clauses in the engagement letters and a notice period given to clients.

Q: Are customers asking how Brexit will affect their products with you?

>> Managing relationships with clients has been really important – alongside that goes appropriate information delivered to the clients about banks’ plans and decisions – some of the comms are high level and generic, but that has also turned to specific comms around clauses and agreements.

Q: What financial services will be left it the UK post Brexit and what will the City look like in 2040?

>> The biggest challenge is talent. There won’t be any rowing back from having a hub in Europe but even those new centres for talent are now much more expensive so initial cost-savings are gone.

Q: What have you learned from the experience? What ways of working or experience of change management might make legal and regulatory change more straightforward in future?

>>Regulatory change projects used to be very ordered, but this has been a baptism of fire; there is no written plan. Brexit has prompted lawyers to consider issues and practices that were taken for granted; it’s been a crash course in European financial regulation. Legal is the prism through which things are focused on board level. Legal has gone from being something that can be an old-fashioned approach, doing the product bit, to become a function that can drive the strategy. But while Brexit is a legal issue, you can’t be telling the business what to do at the end of the day – all you can do is provide the ammunition.

11.30: Reporting from editor Catrin Griffiths. 

The geo-economic context of financial services regulation

With three – possibly – days to go till the UK leaves the EU, The Lawyer’s In-house Financial Services (IHFS) Conference kicked off with the bigger picture that put current political and economic uncertainty into a wider, geo-economic context. Shamik Dhar, chief economist at BNY Mellon, outlined current characteristics of the global economy and their implications are for regulators. Here are the three major takeaways.

  1. The global financial crisis is not a thing of the past – Combined with major geo-economic change of the last 30 years, the GFC has exacerbated longstanding inequality issues. While across-country inequality has fallen and emerging economies such as China and India, all in the 20-60 percentile range have seen strong income growth, at the upper end of the world’s economies there has been no income growth at all. While by world standards the Western working class are relatively rich, they have felt the biggest drop. Conversely, the biggest gains in global growth have gone to the top one per cent – again, exacerbated by the GFC and setting in motion a profound political shift.
  2. There may not be a recession, but keep an eye on Italy – Dhar, who prior to BNY Mellon was chief economist at the Foreign Office, gave some comfort to the delegates with the prediction that there is unlikely to be a major recession. But he did warn that global growth was set to slow in 2019 and 2020, partly generated by a slowdown in China. The more immediate problems may stem from Italy, whose vulnerability has not been priced in by the financial markets. Italy may prove a greater threat to financial stability than Brexit.
  3. Economics gets political: the public swing against the elites – One of the legacies of the GFC is that public mood has swung against untrammelled markets and that regulators have a credibility and responsibility in the minds of people that they didn’t have 10-15 years ago. The suspicion of markets is greatest these days in the advanced economies. Allied to this is a theme of geopolitical fracturing, with major multilateral institutions such as the IMF and World Bank under attack. Of key importance to those working in regulated sectors, then, is that the role of regulatory solutions is being called into account because of economic nationalism produced by the GFC. We may have seen peak global co-operation with Basel 3. Regulatory competition could be a helpful development, but one thing is clear: we have passed the high-water mark for globally harmonised regulation.

The conclusion: Nimbleness is going to important not just for companies but for regulators as well




9:15: It’s our In-house Financial Services conference today and we’ll be blogging throughout the day with updates on the event.

4 April 2019

While Westminster continues to debate the UK’s exit from the EU and the country slides into a political crisis, some of the biggest legal names in the financial services and fintech industry are gathering to thrash through the implications.

On Tuesday 9 April The Lawyer will be reporting live from the In-house Financial Services conference, which includes keynote speeches from Shamik Dhar, former chief economist at the Foreign Office and now chief economist at BNY Mellon, and Slaughter and May financial regulatory partner Nick Bonsall.

The Lawyer will also be covering discussions on Brexit planning led by AIG GC Chris Newby, Zopa GC Olivia Broderick and Royal London GC Fergus Speight; and the future of UK fintech in the UK, led by MarketInvoice legal head Eoin O’Reilly, Capital on Tap GC Simon Coles, Monzo GC Dean Nash, Seedrs legal director Leah Moon and Linklaters global co-head of fintech Harry Eddis.

The Lawyer‘s liveblog will also report from the debate on change management in financial services, which features contributors from EY Law, HSBC, Euroclear and Post Office; open banking, led by Barclays, Paysafe Lloyds, Mastercard and GoCardless; and the relationship between legal and compliance, a session that will see Hyperion Insurance GC Will Bloomer debate with Fidelity International chief compliance officer Philiip Hanssens.

Look out for The Lawyer’s rolling coverage of these key debates on Tuesday or follow the debate on Twitter: @thelawyermag

Brexit survey: Majority back revocation as lawyers lose faith in Labour and Tories