Regulatory Technology (or RegTech for short) is directly linked to Financial Technology (FinTech for short). Both are crucial in a modern economy landscape, where safety, stability and predictability are a must. What is RegTech, what are its uses and benefits?
Simply put, RegTech is the use of new technologies to help with the delivery of regulatory requirements in the financial sector. In plain English – companies (e.g global banks) that are not ready for securing data and analytics, are about to face the hard reality of a modern ecosystem. The reality is, that everything is connected. RegTech emerged from the famous storm of 2008 when the financial crisis swept away many businesses and private savings. Since then, financial institutions all over the world are a subject of the mandatory and very demanding system of controls, targeting not only malversations, but also user data security.
To compete on the market, many firms adopts multiple new approaches, for example data mining and customer-oriented databases. Therefore they have to obey not only the rules of General Data Protection Regulation (GDPR) but also common sense-based rules of protecting internal corporate intelligence.
The key FinTech working approaches that banks could benefit from are:
These points were formed by Gideon Valkin, a co-founder of Friendly Score. Back in 2015 on FinTech Connect Live, he promoted the view by which all financial products should be user-centric. It’s not about safety alone, usability plays a vital part as well. For now, let’s just focus on safety.
The user-centric nature of FinTech products made easy for them to deliver transparency and reliability. There should be different layers of tailored security that meet requirements of different platform (stationary, mobile). Customers should have the option to review the data organization gathered on them and edit, if necessary. It’s another layer of regulation.
The key to the future of RegTech lies in regulations built into technologies on the very stage of development. Things like cloud computing, predictive analytics, artificial intelligence (AI) or business intelligence are significant when it comes to reducing the overall cost of regulations and their impact on the company. The financial industry believes that currently spending on the efforts aimed at being compatible with the regulations are circling around 1/5 of the overall operational budget.
The current situation makes RegTech the natural partner for FinTech. FinTech makes financial products more accessible for the customers, while RegTech serves as a watch dog, securing the transactions and increasing transparency. Valkin, alongside PwC says, that the potential and benefits of RegTech comes from:
The financial sector also points towards technologies that can help iron out the current regulatory situation. The biggest potential seems to come from:
Further opportunities include:
At CSHARK we believe in practical and complete solutions for software product development, so we search for trends and solutions representative of what may become a hit right around the corner. We believe the future of RegTech can be:
Financial institutions can learn more about user and connections between them. In order to minimize the risk of unwanted transaction or behaviour, it is best to actively search for compliance issues.
By using natural-language processing capabilities and with the help from information coming from biometric and facial-recognition solutions and social media, banks can not only store information but also process it real-time and for example block the access to the account for a people or organisation considered persona non grata.
Keeping up-to-date with the latest developments in law is not an easy task. Everyone who had even a slight experience with widely understood compliance, know this. By performing regular scans for revised acts and by generating automated reports, organizations can save money and stay on top of things.
They help by automating the risk-management process, making it easier to swim in a muddy waters full of similar judiciary regulations and risk profiles
RegTech is a vital element of a global financial security system. Benefits? Measurable. Risks? Minimized. Future-proofed technology? Seems like it.