In this exclusive interview with Marco Araujo, the former Chief Legal Officer at Nubank & Global General Counsel at HSBC, we explore the most thrilling advancements and transformations witnessed in the industry in the past 24 months. Marco sheds light on how exogenous factors have reshaped the fintech landscape, emphasising the growing importance of trust, quality, and sustainability. He also highlights the pivotal role of RegTech in enhancing financial processes while acknowledging the ongoing battle against financial crime.
In the final segment of our conversation, Marco offers his perspective on the future role of cryptocurrencies in the financial sector, emphasising the potential of crypto technology to provide efficient and reliable infrastructure.
Bradley Collins: Hi Marco, given your experience in some of the world’s biggest and most exciting FS organisations – what would you say have been the most exciting advancements or changes in the sector in the past 24 months?
Marco Araujo: We have seen a lot of developments during this period. Maybe the most relevant changes during this period came as a result of exogenous factors affecting the fintech environment. I am referring to macroeconomics (inflation, higher interest rates, etc.). Extreme low-interest rates, and excess liquidity created business models that focused exclusively on growth in the detriment of quality, cost control, good governance, and sustainable long-term results.
The only goal was “growth”, regardless of the profitability. At the same time and as a consequence, we saw huge market failures such as SvB, FTX etc which caused a seismic shift in the fintech world. More than ever the element of “trust” is key for having a good valuation AND a good performance. I refer to trust in the sense of being financially viable and robust, and really serving the client in the long-term – giving the clients what they need, in a very reliable and transparent way, impacting their lives to the biggest possible extent.
Now we see much greater scrutiny on the quality of investment/management, on the regulatory landscape, and on the level of governance. In terms of exciting advancements, we must note the fact that certain central banks are indeed embracing new technologies and promoting relevant changes. I invite everyone to check the advances the Central Bank of Brazil has been making in terms of open finance and now adopting its digital currency (CBDC) which will change the financial market and bring much greater supervision and security.
Bradley Collins: How has RegTech affected the space and what more is there to come?
Marco Araujo: There have been huge developments in the reg tech world by using machine learning, AI and other tools. The ways we onboard clients, manage transactions, and report risk have improved tremendously in the past few years. But so has the ability of “bad guys” to interfere and affect all the benefits tech is bringing to society. Despite this improvement, I still believe that we are not where we should be in terms of winning this battle. If you ask me if we are winning the game against criminals and fraudsters, my answer would probably be “no” – it would certainly not be a blatant “yes”. There is much more the tech world can do in terms of identity management and transaction monitoring (while simultaneously preserving privacy) and setting cooperation among the stakeholders. It is a matter of investment and prioritisation.
Bradley Collins: Finally – I’d love to get your take on the role crypto will play in the sector over the years ahead.
Marco Araujo: Crypto has been marginalised by part of the society. However, the technology behind it can provide society with the correct infrastructure to have a very quick, cost-efficient, and reliable tool. So can AI, which now has become “the” thing for a lot of people and certainly has been part of a lot of recent discussions. Anything can be weaponised or vilified by anyone. It is a matter of providing the correct guardrails to prevent the “bad” from infiltrating the “good”.
Key takeaways:
1. Prioritise trust over blind growth: In the rapidly evolving financial services sector, prioritise trust in the sense of financial viability, robustness, and long-term client service. Focus on providing reliable and transparent solutions that positively impact clients’ lives, even if it means sacrificing immediate growth.
2. Embrace scrutiny and governance: Expect greater scrutiny on investment quality, regulatory compliance, and governance. Ensure that your practice adheres to rigorous standards in these areas, as they are becoming increasingly vital for valuation and performance in the industry.
3. Leverage technology with caution: Embrace RegTech advancements, but acknowledge that there’s more work to be done in the fight against criminals and fraudsters. Invest in identity management and transaction monitoring technologies while preserving privacy. Collaboration among stakeholders is key to making significant progress in this battle.
