While much of the conversation around financial technology (fintech) has focused on the consumer experience and revenue enhancement, many of those same innovations — robotic process automation, machine learning, natural language processing and data analytics — are being applied with great success to regulatory technology, or regtech.
Regtech is not just about applying technology to current manual processes that support compliance; more important, it’s about examining the ways those processes have been approached in the past and digitally transforming them going forward — such as eliminating manual handoffs that add complexity and risk, improving data quality, and reducing reporting time.
I’ve discussed the rise of regtech before, and how it is a game changer not only through the creation of new technology but also by applying it to bring about the efficiencies and effectiveness that banks really need right now.
This is especially important at a time when banks and other financial institutions are evaluating their data analytics capabilities and looking for ways to comply with new rules on everything from GDPR to cyber risk.
Regtech is an important part of a financial institution’s digital transformation journey. As processes become more automated and more data becomes available, financial institutions need to have the right analytical tools and dashboards to comply with regulatory rules such as anti-money-laundering (AML) and know-your-customer (KYC) requirements.
Excitement is building in the regtech world right now. We’re seeing a lot of investment not only from venture capitalists and individuals but also from big banks. Financial institutions are either building their own regtech capabilities, partnering with regtech firms, or investing in or buying regtech companies to expand their capabilities.
Regulators around the globe are working both to understand these new technologies and to establish a safe environment that encourages banks to explore technology and automation. Asia – especially Singapore – is the leader in this trend; however, the ecosystem has not evolved consistently in all regions and geographies.
The regtech market is fragmented as well; it is rapidly evolving and expanding, with lots of players, but it has yet to coalesce around any real leaders. Many variables remain to be resolved, which is one reason attending a regtech conference these days is as exciting as it gets in the world of banking regulation, even as the number of regtech events and conferences increases.
I have been making the rounds of these conferences, both as an attendee and a speaker. I will be teaming up with Chris Tocin from M&T Bank at the upcoming COMPLY2018 conference on May 16-17 in New York to talk about the cultural shift that helped him establish the organizational value of compliance and the importance of regtech as the most cost-effective and efficient way to realize that value.
This perspective, I think, is particularly important, because the sooner banks realize that investing in compliance shouldn’t be an afterthought but rather something to plan for upfront, the sooner they will begin to reap the considerable benefits of regtech.
I strongly believe that regtech should be considered as a strategic driver instead of a specific technology solution for a specific regulatory problem or requirement. Leaders today are asking, “How can we make our compliance process more efficient, less expensive and more reliable using a toolbox of available and cutting-age technologies?” The answers are going to be exciting, and I look forward to sharing my thoughts on new developments with you. To follow future discussions, subscribe to this blog and refer to protiviti.com/regtech.