Stifled by bureaucratic processes and legacy infrastructure, organizations in the banking sector are increasingly embracing RegTech solutions to address regulatory challenges and requirements, and close compliance gaps much before deadlines. No wonder, RegTech is topping the charts among all the ruling trends that are poised to transform FinTech going forward. 

However, not more than 17% of organizations have implemented RegTech solutions. Clearly, this is because of the strained resources, a changing regulatory landscape, and the legacy infrastructure. Nevertheless, RegTech promises to revolutionize the approach that banks have toward compliance management and the future looks rosy for every financial institution ready to embrace it.

Where Does it Work Best?

While RegTech growth is promising, does it serve as the solution panacea for all compliance challenges? The answer is unfortunately negative. This is due to the level of subjectivity considered in managing such risks. The areas where RegTech has the potential to deliver unprecedented value include information-based obligations, quant-based obligations, and risk management tools, such as:

• Compliance universe tools
• Training tools
• Activity-monitoring tools
• Risk Data warehouses
• Regulatory Reporting systems

Tools, such as Tableau, Pentaho, and Hadoop are placed on the top of the virtual lake, allowing tailor-made reporting to be developed in a way that is malleable enough to meet the regulatory requirements. These tools can further allow companies to leverage Big Data and derive critical insights related to compliance management. For instance, Tableau is a visualization tool that can recognize trends on the basis of data and develop regulatory perspectives to identify outliers.

Changing the Compliance Culture

The Northwestern Journal of International Law & Business published an academic paper in October 2016 titled "FinTech, RegTech, and the Reconceptualization of Financial Regulation." According to this paper, RegTech is more than just an efficiency tool. It is rather a pivotal change, which leads to a paradigm shift in the regulations. While showcasing its monitoring capacity, it has also provided close to real-time insights through artificial intelligence and deep learning filters and identified glitches much in advance instead of taking enforcement action.

The RegTech sector is in its initial stages, however it has already started demonstrating sustainable return on investments (ROI). For instance, a RegTech product can digitize datasets to enable awareness and transparency across organizations, alerting them to significant control gaps, which need immediate attention. Their solution can create a positive change in the compliance structure and enable potential cost savings by lowering consultation costs.  

The Future Ahead?

With RegTech, financial institutions have several opportunities to enable control management and regulatory assessment. As we venture into this new paradigm, firms should start:

• Making the most of the data they have
• Leveraging the technology investments that prove to be a powerful solution to overcome challenge
• Conducting comprehensive research to identify organizational regulatory technology
• Identifying what their competitors or peers are doing to stay ahead of the competition
• Embracing new technology

HCLTech, through its Risk & Compliance services, focuses on finding new solutions for clients. Besides helping enterprises embrace disruptive technologies and transform their businesses, HCLTech also allows them to thrive in a challenging marketplace.

References:

https://medium.com/datadriveninvestor/regtech-the-next-big-thing-in-fintech-92901dd7b695

https://www.cbinsights.com/research/regtech-four-phases-expert-intelligence/