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Revolution of PropTech

  |  2019
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Revolution of PropTech

PropTech is the collective term used to describe the wave of tech innovations set to disrupt real estate markets. The future is both exciting and hard to predict for the real estate industry at the moment as PropTech is already starting to make its presence felt in both the residential and commercial property worlds. There may be some work to get through before its effects are as game changing as the FinTech (Finance Technology) disruption we are currently witnessing, but as with all other disruptive technology waves, the future is nearer than you might think.

How will PropTech change real estate?

Whilst it’s impossible to predict the future of technology with any degree of certainty, we can make some pretty educated assumptions based on the existing PropTech ecosystem as well as the evolution of previous tech waves. The adoption and longevity of any technology hinges ultimately on whether it improves the lives of its users. In the world of real estate, this means that many specialisms will be enhanced by new and emerging tech solutions whilst others may be replaced entirely.

It’s not hard to imagine a future only a few years away from now when a company might be able to find and acquire properties by leveraging Big Data. Blockchain technology can then be used to drastically speed up the purchase. Thereafter a model of the renovated property can be quickly generated with 3D printing technology and, finally, interactive tours of the property can be offered with the use of Virtual Reality to assist with selling.

But this is only one scenario in an ever more complex landscape and how tech might shape for any given specialism within the real estate sector is best assessed by an experienced head with a good understanding of the emerging trends in the industry.

So, should real estate professionals be worried by the rise of PropTech?

The short answer is it depends. The technology revolution is disrupting all industries and presents huge opportunities to early adopters. As has always been the case however, professionals and companies that are slow or resistant to change risk being left behind and so the threat of becoming obsolete is real. We are in the midst of the fourth industrial revolution which is seeing the lines between the physical and digital worlds merged ever closer. The change that technology brings is demonstrably game changing and as a result, the benefits to those who capitalise on it early are similarly game changing.

Here are some tips to ensure you stay ahead of the PropTech curve:

Clients: How are your clients’ needs evolving? What technology can you adopt that will ultimately make life for your clients easier?

Read: Keep up to date with industry news and in particular emerging tech. Keep yourself informed and view technology as a crucially important topic

Invest: Set aside budget for investing in technology. Be sure to develop a good base understanding of PropTech before assigning funds but make sure this is considered a priority in your business.

Which technology should you adopt first?

The answer to that question really does depend on exactly what you do and who your customers are. For real estate investors and developers, streamlining projects to optimise profitability should be the first port of call. Software that connects staff and contractors, automates project management and handles finances (including Return on Investment calculators for your portfolio) adds tremendous value and serves as a good base upon which other technologies can adopted further down the line.

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The rise of SupTech

ver the past 10 years since the financial crisis, there has been a seismic shift in the regulatory landscape affecting all financial services firms. In order to avoid another meltdown, new rules and regulations have been created, and regulators have become increasingly more vigilant at policing compliance with the myriad of new rules.

More recent developments also include the innovative contributions of new ‘financial technology’ firms (FinTechs), the internet of things (IoT), cloud services, artificial intelligence (AI), distributed ledger technologies (DLT) and many more evolutions that may require not just new regulations, but a completely different way of regulating and auditing the sector.

All of this means that both financial institutions and regulators need to look at smart solutions for infrastructure, data and analytics and we have already witnessed the rise of RegTech, with specific technology solutions focused on regulation. 2018 is now shaping up as the year when RegTech and the emerging ‘supervisory technology’ (SupTech) will each come into their own, and as they mature they must become part of a joined up landscape to ensure robust safeguards.

Technological advances have enabled the use of both unstructured and digital data in ways that were previously unimagined, which has permitted complex algorithms to sit on top of large data sets using AI and machine learning (ML) to analyse data faster and at a much more granular level.

New ‘non-bank’ players are also expanding rapidly in the FinTech market with both established and more recent enterprises creating new business models and launching new products. The aim of this is to take advantage of the increased data storage and infrastructure opportunities cloud technology allows, as well as a faster time-to-market provided by automated processes.

The changing landscape of finance, whilst bringing new opportunities, also brings new risks that must be adequately monitored and mitigated, both internally and by external regulators. The increased automation of data also opens up questions about data protection and privacy. Increased use of technology requires increased cybersecurity and there are specific concerns around cross border data flows and jurisdiction for borderless technologies such as DLT and audit trails for the automated decision-making that is a product of ML and AI.

Financial institutions (FIs) are increasingly utilising RegTech to streamline their regulatory compliance processes. The same technologies that are driving FinTech innovation are now being used to ensure FIs implement the latest regulatory changes, monitor compliance and report correctly to the various supervisory bodies. Data gathering and analytics are improving daily, unstructured data (such as complex documents can be scanned to identify new regulatory requirements), and processes are being automated to allow compliance whilst cutting costs.

The automation of know your customer (KYC) and client onboarding processes and the increasing sophistication of transaction monitoring is helping to identify and prevent financial crime at source, whilst the collection and analysis of risk data is being refined to an ever more granular level. These solutions together with automated reporting are improving regulatory compliance within FIs, but without a similar revolution for the regulators, there is a risk that reported data will not be adequately analysed to understand the underlying trends.

As well as the huge amounts of data being provided to regulators for current compliance initiatives, there are also decisions to be made on how new technologies, business models and products should themselves be regulated and whether a fundamental shift needs to occur in the global regulatory processes.

The data sent to the regulators is in pre-defined formats, defined by rigid templates, which are often specific to a regulation, regulator or jurisdiction, making it very difficult for regulators to share data or run complex analytics to identify root causes. The adoption of SupTech by regulators promises to help streamline the ingestion, analysis and reporting of financial trends on a global basis across multiple markets and regulators. However, it is vital that SupTech solutions should include a shift away from traditional templates towards the collection of raw data from the FIs, including unstructured data such as documents, emails and videos.

The gathering of even more data by the regulators implies that data collection, aggregation and storage processes must be improved. This could be achieved by hosting the data in the cloud and automating the collection and aggregation process as either a ‘push’ from the FIs or a ‘pull’ by the regulator.

The collection of raw data would then enable the formatting to be the responsibility of the regulator. If the data were held in a single authoritative source, regulators globally would be able to run analytics over it using their preferred models. With a federated data model, national regulators could run root cause analysis and share findings in the same way as national crime prevention units.

Another advantage of moving to this type of model is that data is harvested dynamically rather than at set periods, as is the current norm.

Re-engineering the data collection and aggregation for individual regulators could be a current solution to the immediate problem, but the sharing of data in a federated model will require a shift in approach from the wider supervisory community. New borderless technologies such as DLT may also require increased data sharing and even supra-national regulation.

Looking into the future, the new technologies offer a wealth of solutions to regulatory supervision that could transform the way compliance is monitored and analysed. ML algorithms and an improved interoperability are a pathway to real-time solutions and even predictive supervision. This could lead to increased and shared analytics, but to achieve a joined up future landscape that allows for new scenarios across new regulations, the building blocks must be put in place now.

As with FinTech and RegTech, SupTech needs clean, relevant data that uses a common data dictionary for advanced analytics; it needs the flexibility and increased capacity of cloud storage; and it needs automated processes, which have been properly re-engineered to remove redundant and manual steps.

Once the foundations for SupTech are secure, the benefits for both regulators and the market could be of huge!

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Case for SupTech

RegTech is often named as the solution for banks to deal with the wave of new regulations that has swept across the industry over the last couple years. In reality, the application of regulatory technology does not stop at financial institutions but on the other side of the table as well. Instead, innovative tech like Big Data Analytics, Artificial Intelligence or Blockchain can and must be used by regulators, too.

What is SupTech?

Supervisory Tech aka SupTech is dubbed RegTech for Regulators. Like financial institutions the authorities are facing the same problems. Too much data and poor data quality to understand what is going on in the industry they supervise and they have bombarded with thousands of new rules. Without the application of cutting edge technologies, regulators cannot keep up with their responsibilities. SupTech describes the solutions and services that improve on the management and execution of the regulatory process. In developed economies it is a powerful tool, but examples from less established financial systems show that the benefit can go way beyond better regulatory processes as the World Bank’s article about leveraging ‘SupTech’ for financial inclusion in Rwanda shows. A common phenomenon that is true for RegTech in general as well.

The 5 Use Cases of SupTech

Generally, we can classify the different use cases of SupTech into the following categories:

Reporting

Reporting is an obvious choice for the application of innovative solutions. Automation can drive down costs and produce better results in the supervision of financial institutions. This area is the subject of the recent FCA Call for Input on using technology to achieve smarter regulatory reporting. The British regulator has invited all interested parties to voice their views on how the FCA can improve the reporting process and outline the technical steps that developed this proof of concept as well as on the broader issues surrounding the role technology can play in this field.

Monitoring

Monitoring with regard to various aspects, e.g. money laundering, market abuse and insider trading is another hot topic for SupTech. Thanks to advancements in big data analytics, regulators could go through vast amounts of structured and unstructured data, which could produce new insights and support more informed decision making. By using new visualization solutions patterns can be extracted and presented in a useful way out of the raw data. Simulating the impact of existing and new norms would help understand the consequences before any new regulation is implemented, preventing unintended results and improve the authorities’ understanding of compliance systems within the supervised firms. Now assume that everything happens in real-time and a regulator holds a powerful tool in its hands to prevent market rigging or to block suspicious transactions.

Automated regulation

The implementation of new rules costs like MiFID II or GDPR presents financial institutions with a massive regulatory burden both in terms of costs and use of resources. Imagine a way where lawmakers decide to change the existing rules and it gets transported into the policies and procedures automatically. Too good to be true?

Firms in the field work with semantic technology and data point to convert regulatory text into a programming language.

If regulation were machine-readable, it would allow more automation and could significantly reduce the cost of change. It would also harmonise policies  and ensure greater consistency between the intentions of a regulation and its implementation. The next step is even more exciting: based on the insights from regulatory monitoring as described above solutions using artificial intelligence can then ‘learn’ to produce better regulation.

Regulatory Products

AML, KYC and Financial Crime are one of the most popular areas for RegTechs. Considering how long it takes to onboard a new client and how much it costs, it is no wonder that clever start-ups have targeted this field to disrupt and take into the digital age. What if, for example, a regulator were to present a solution that would relieve financial institutions from this painful process and offer them a solution to do it for them? What if the authorities were to create a central client database that financial institutions could access and provide clients immediately with their services and products? Obviously, for a fee, which, however, would be significantly lower than what banks spend right now for the whole process in-house. So far, no regulator is offering this service, but shared services are a very promising area for SupTech (and RegTech if you can reach a critical mass). Considering that different systems for reporting, monitoring, or client onboarding, to name just a few, not only time consuming and expensive, but also create inefficiencies in terms of results and duplication, you clearly have a business case.

Proactive Regulators

The combination of the above and the general use of innovative technologies can also create additional effects for better supervision. Proactive Regulators means less fines as regulators can intervene in real-time where they discover a breach of rules. It also means a better understanding of the impact of regulations and more efficient collection of feedback on policy effectiveness. And it results in lower compliance costs for financial firms:  while it can lead to potentially higher IT costs, at least in the short term, in the long run it will reduce head count at firms. It will also put regulators in the driving seat with regard to the process of investor and consumer complaints. And it will make a financial ecosystem more attractive as it is easier and cheaper to do business there.

What lies ahead?

SupTech faces similar obstacles as the general RegTech sector. If you only think about the long

Regulators might also be more targeted by hackers. Think about the various – real or alleged – cyber attacks in relation to elections around the world and you have an idea that it would provide criminals with a lucrative target, so authorities must continue to make cyber security an absolute priority. Even without the risk of cyber security though, mistakes within the systems of a regulator could have far larger ramifications than an error, say, in the trading system of a financial institutions. While the latter might cause flash crashes and put entire companies out of business (think Knight Capital), one can only imagine the consequences of a serious glitch within an entire regulatory framework could have.

While the risks may be significant, but the reward could outweigh these easily and after all, isn’t good risk management at the centre of SupTech?!?

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A step in the ERP direction

The ultimate venture every IT house undertakes at its pinnacle is to get into the ERP business.

As TechDev Factories (IT companies) gain strength and experience, they build up a portfolio of small solutions for pretty much every leading market vertical and then there comes a time when putting them all together in 1 piece seems imminent to create a market niche for themselves.

We at Premium eBizSols found at that cross road in 2019. The last 2 years went if actively creating solutions for various clients and venturing into unknown territories of technology applications. The result was a portfolio of solutions that had a potential of creating a bigger impact when put togather. Hence we started thinking big and started 2019 with the plan of creating our own ERP. A dream led it to be branded as NuePayTree.

The plan is simple…to start small and over time grow. Keeping in line with the trends, the key factor is SAAS platform. Deviating from the conventional models, the solution will be purely offered as Software as a Solution. A lite version is in the making and we’re expecting to roll out the pilot soon. We’d like to see how the product is received and perceived in market and take it to new heights from thereon based on the demand factors and feedback from our users.

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Premium Partners with AFS

Premium eBusiness Solutions makes its foray into the FinTech world by joining hands with Advance Financial Solutions (AFS). The 2 signed a memorandum of understanding in March 2019 to collaborate on marketing and support services of AFS’s solutions in the Territory of Pakistan.

AFS is a Bahrain based subsidiary of Midis Group since 2000 that has a suite of services and solutions catering to primarily to the financial institutions. They have been one of the pioneers in the MENA region spear heading SupTech and RegTech initiatives.

The association comes as Premium eBusiness Solution commemorates ifs 5th year of operation. “Over the years we have gone from a solutions innovator to solutions provider, the experience and that expertise that we build along the way helped us gain a recognition from the local market. we now look forward to take our services international and partnering with AFS for Pakistan comes at the right time as we look forward to participate in the thriving FinTech initiatives of Pakistan” Said the MD of Premium eBusiness Solutions, Sadaqat R. A. Sattar.

Premium eBusiness Solutions and AFS will be closely working through the coming months to chart the course of action for its venture in Pakistan and strategically setup a local operation in Karachi and Lahore.

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