RegTech is a new term believed to transform the financial industry. In view of the growing complexity and more stringent rules in a regulatory environment, financial institutions are considering how to create new solutions to meet regulatory requirements.
Described as a new FinTech, RegTech includes software applications designed to manage regulatory compliance and reporting needs. With the growing level of regulation and increasing data volumes, companies using the technology will be able to save their time and resources to ensure regulatory compliance.
“Like FinTech, PayTech, and many other combinations of XXXTech, RegTech is another example of an industry that is being changed rapidly by software,” Alan Meaney, FundRecs CEO, explains in a new report by Deloitte. “There has been technology used at various levels in the Regulatory space for over 20 years. However, what the new RegTech label recognises is that the gap between software and non-software enabled services has widened significantly.”
Advanced security and an increased performance are among the main advantages of regtech solutions. The technology will help companies to minimize operational risks and automate their compliance tasks.
According to Deloitte, RegTech benefits also include:
- Agility – Cluttered and intertwined data sets can be de-coupled and organized through ETL (Extract,Transfer Load) technologies.
- Speed – Reports can be configured and generated quickly.
- Integration – Short timeframes to get solution up and running.
- Analytics – RegTech uses analytic tools to intelligently mine existing “big data” data sets and unlock their true potential e.g. using the same data for multiple purposes.
BBVA Research’s expert in digital regulation, Javier Sebastián, says the technology offers clear benefits for regulatory authorities, including information accuracy, granularity, and almost real time availability.
“What makes regtech different is that its proposal builds on the new technologies. These technologies allow to improve information responsiveness, flexibility, availability and accuracy levels,” he earlier said.
“Most likely, all banks will end up using regtech solutions, not only because of how fast the ecosystem is growing, but also because the big incumbents in this field are also adopting technologies that rely on regtech solutions.”
Although RegTech is still in its nascency, the potential of the technology is obvious. Over the last few years, a number of new regtech startups have appeared on the market.
The US-based data provider Thomson Reuters recently introduced Regulatory Change Management (RCM), a new solution aimed at simplifying compliance procedures.
Trulioo provides instant electronic identity verification for over 4 billion people in more than 40 countries. Ireland-based Vizor offers software that helps financial regulators to simplify financial regulation systems. Corlytics provides compliance risk analysis for financial companies.