• Kirsten Saliba
  • 22 April 2022
  • 5.2 mins

As the global economy becomes increasingly data-driven, the emergence of “big data” along with the rapid development of technology in the world today has begun to revolutionise the regulatory space in the financial sector.

The use of technology in the finance sector (termed FinTech) is ubiquitous for financial services and represents the paradigm shift within the industry. Financial services firms are no longer relationship-driven; they are data-driven.

Once they realised that they were sitting upon veritable treasure troves of data, they began to leverage it to drive business growth and profitability. Financial firms have made use of the scalability of technology to mine their data sets and transform information into tangible returns, which is why FinTech continues to grow and has increasing influence.

The purpose of FinTech is to reorganise how firms in the financial services sector use technology to capture the demands of customers. It started by consuming decades of manually created customer data (i.e., paper forms and documents) and has now evolved into producing and capturing new types of customer data, mobile data, internet data, user feedback etc.

But, due to the burgeoning costs of compliance, disruptions within the sector through FinTech and the need for detailed insights based on data and analytics, the unique characteristics of RegTech have allowed it to augment this FinTech movement by providing flexibility, speed and robust analytical capabilities found within its solutions.

Looking beyond some of the most obvious benefits (which we will cover) such as saving time and costs, RegTech is able to offer so much more. Developments in AI and Machine Learning are a huge driver behind RegTech sweeping across the compliance space in the financial sector.

Since most of the finance sector’s legacy systems for compliance are unable to satisfy or keep up with, the increasingly stringent regulation norms, following events like the 2008 financial crisis and the 2020 pandemic, more and more financial services businesses are consulting with RegTech firms. PwC statistics reveal that about 10-15% of the global workforce is involved with some form of regulatory compliance. The finance sector spends around $270 billion on regulatory compliance globally, so it is not a small expenditure or part of the business. Statistics also reveal that regulatory change between 2008 and 2015 amounted to 492% in terms of global volume, while analysts only spend 10% of their time on the required data analysis to implement organizational compliance.

RegTech (short for Regulatory Technology) is, simply put, the use of technology that can help the FinTech industry (and others) with regulatory and compliance issues and processes. RegTech will help in monitoring, reporting and complying with regulations that would traditionally take a lot of time and money if done manually in house. While RegTech has undoubtedly changed the way the FinTech industry operates, it still continues to provide benefits in many, many different ways in the current landscape.

What are the Benefits?

Cost & Time Efficiency

This is the most prominent and heralded benefit of using RegTech. Companies are most certainly cutting down the costs they incur through the use of top quality RegTech. Not only through the automation of systems that would take many hours and increased personnel, but also through the avoidance of fines and penalties for not complying with regulatory laws and rulings. Through this cost and time efficiency, companies are able to gain a competitive advantage and free up the capacity to focus on more lucrative ventures elsewhere in the business.

Improve Risk Management

Using the right technology, companies can detect and prevent any potential risks that may harm their business before they become damaging. These risks include but are not limited to, things like market abuse, non-compliant trades, fraud, money laundering and cyber-attacks from outside parties. By having an early warning system, businesses will have an easier time tackling these potential threats before any major harm or damage is done.

Security for Customers

RegTech will not only directly benefit a company itself but, tangentially, also give benefits to its customer base as well. Despite the wide adoption of technology, many users are still wary of sharing information with relatively unknown third parties (which they should be, protecting yourself is important). A company being augmented by a well-known and secure RegTech system will act as a guarantee and give them a sense of security. If customers believe their data will be safe, it will make them more willing to share the necessary data.

On that same note, a company that is secure through the use of RegTech will gain a reputation as a safe entity to do business with or entrust with your finances, meaning new customers are more likely to choose you as an option for their own services.

Compliance Intelligence

The existing compliance strategies are monitored against upcoming regulations in a process known as compliance intelligence. Solutions formulated by RegTech firms help with regulation reframing and also implementation of new governance in finance. These firms identify regulatory risks through data analytics through a risk-based approach and find issues in legacy approaches to risk management. This holistic approach to compliance can help companies in identifying risks before they have an adverse effect on the company’s revenue stream.

The benefits of RegTech for FinTech companies are very clear and obvious, but there are still challenges out there that RegTech is still developing and need to be able to apply to the companies that utilise it. Just like any other modern technology, RegTech is still evolving and maturing and, to aid in its progression industries like FinTech and banking need to work together to drive large scale adoption so RegTech can access and revolutionise the landscape.

Here at Sekuritance, we recognise the importance of protecting your company and have developed a world-class RegTech ecosystem to support and augment business growth to protect you and your customer base. Visit us at www.sekuritance.com and see just how Sekuritance can benefit you and your business.

About Sekuritance

The Sekuritance RegTech platform provides a single platform for every eGRC need, including end-to-end AML/CTF, CECL, FCPA, vendor management, beneficiary onboarding, investor check, card processing MFA checks, blockchain wallet checks, cyber-risk assessments, and other RegTech or Business Process Management requirements.

Stay tuned for more info and follow us on:

Twitter: http://twitter.com/sekuritance

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Website: https://sekuritance.com

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