What Everybody Ought to Know About RegTech
Customers, Financial Institutions (FIs) have seen the explosion of FinTech in the last several years. In fact, Financial Institutions are expected to invest more than $118.70 billion on technologies by 2020. RegTech is one of the most recent technologies disrupting the risk and compliance space.
The Financial Conduct Authority (FCA) describes RegTech as the “adoption of new technologies to facilitate the delivery of regulatory requirements.” Despite the fact that technology has been used to address regulatory requirements, RegTech innovations have enhanced the adoption and utilization of technology for better and faster outcomes in the financial sector.
Some of the salient capabilities of RegTech solutions include:
- Readiness: Unstructured and complex data sets can be organised through ETL (Extract, Transfer Load) technologies
- Integration: Offers short timeframes to implement the solution
- Speed: Reports can be easily configured and generated quickly
- Analytics: Use of analytic tools to intelligently mine existing unstructured data sets and unlock their fullest potential
There are a wide variety of technologies being used in RegTech solutions development which include Big Data, Data Visualization and Blockchain. Other applicable technologies, according to Bloomberg BNA, include Biometrics Verification, Machine Learning, Robotics and Artificial Intelligence for processing large, unstructured data such as e-mails, Facebook posts and the use of application programming interfaces (APIs).
These technologies are used for aggregating big data, modelling risk for bank stress-testing, monitoring of capital-requirement compliance, updating compliance manuals, improving anti-money laundering and Know-Your-Customer (KYC) programmes and preventing fraud.
BBVA Research noted that some RegTech solutions use Data Mining and Analytics tools which incorporate Computational Statistics, Complexity and Statistical Physics Algorithms (also known as Deep Learning) to enhance the performance of their solutions. Visualisation tools assist in the understanding and reporting of multiple heterogeneous data sources while not requiring programming skills.
Besides the above technologies and techniques, there are real-time and system embedded Compliance/Risk evaluation tools to enhance operational efficiency and effectiveness. Soon, we will see agile software integration tools that will allow those off-the-shelf accounting and compliance tools to interact directly with regulatory reporting systems. Predictive coding, as well as open platforms and networks that are used for data sharing and format standards also play an integral part in the Regtech ecosystem.
What are the long term benefits of Regtech?
- The customer experience will become enhanced - thanks to the development of a robust fraud platform that will keep their financial information secure.
- The financial health of institutions is protected by adopting these advanced technologies.
- There will be improved compliance due to transparency and proactive reporting of risks and compliance.
Speak to us about how Cenza leverages RegTech solutions to help your institution onboard customers faster with improved quality and efficiency.
About the Authors:
Deepak Amirtha Raj is a Research & Strategy Analyst in the Risk and Compliance sector. He focusses on Business Strategy Research, Emerging Technologies and Advanced Analytics. He studied business at Saint Joseph’s College and had previously worked with Royal Bank of Scotland as Business Process Analyst.
Andrew Stuart-Mills has been working in the Financial Industry specialising in the IPO and M&A for the past 25 years. He is at the forefront of Business development and client liaison for Cenza’s ongoing projects. He has prior experience with Integreon, Merrill Corporation and RR Donnelley.