As the volume of regulatory changes has been growing rapidly in the financial services industry, a more automated and cost-effective solution is necessary. Thus, the requirement of RegTech (Regulatory Technology). RegTech involves the use of information technology to help financial services firms understand and fulfill their regulatory and compliance requirements more efficiently, and effectively. RegTech plays an important role in not just FinTech (Financial technology) but whole of the BFSI (Banking, Financial services and Insurance) industry. More and more financial institutions are adopting RegTech, so that they can run their businesses successfully, in terms of a secured and safe financial system.
RegTech as a Key Component of FinTech
RegTech which in simple words can be explained as the marriage of regulations and technology is also called “the new FinTech” as coined by Deloitte. As FinTech has been growing so rapidly, RegTech becomes a crucial part of FinTech, for fast supervision and quick regulation of all the new solutions in financial services. RegTech also allows automation of manual processes and enhances timeline management, simplifies and improves the quality of data and minimizes different interpretations of ambiguous rules and regulations. RegTech also significantly drives down costs, since it works with automation. All manual checks are eliminated, thereby simplifying the process and reducing costs and time.
Long-term Benefits of RegTech
The most important benefit of RegTech in the long run is positive customer confidence coupled with enabling innovation in FinTech models. Some of the other long-term benefits are listed below.
- Increased market stability: The financial health of institutions is of paramount concern to keep the market stable. RegTech drives customer confidence, and hence contributes to the nature of the market. Implemented properly, it could ensure markets do not experience sudden fluctuations and remain stable.
- Improved governance:The implementation of RegTech makes the system more transparent which, coupled with model-based reporting of risks would lead to greater confidence in meeting the agenda on wider organization governance.
- Enhanced regulatory reporting: Data analysis to bring about better regulatory reporting is the cornerstone of the RegTech philosophy. RegTech would drive better and more insightful patterns from data.
RegTech in Practice
Automation is the watchword of the RegTech industry. Using data analytics and AI technologies, the automation of regulatory compliance makes it faster and prevents the possibility of fraud. Secure systems ensure that data breaches cannot occur, based on constant risk assessment and evaluation. Moreover, it collects all the data gained from operations and stores it in a compliance data warehouse, segregated on a case-by-case basis to help derive better insights from their specifics. With smarter data collection, regular metric assessments, deeper insights and regular reporting, RegTech can change the game in the financial sector.
RegTech in wider BFSI Applications
Compliance is not a choice, whether you are a well established bank or a new-age startup. Because rules and regulations keep changing, banks need a more dynamic and agile solution – which is what RegTech provides. The FinTech hubs of Singapore and the UK are leading the world in regulatory compliance. In Singapore, the Monetary Authority of Singapore (MAS) supports innovation by urging established financial institutions to partner with new firms. They have also committed over $160 million to growing the startup ecosystem in Singapore, providing space and innovation and resources to motivate change. In the UK, the Financial Conduct Authority (FCA) oversees FinTech activities. FCA encourages innovation through tax incentives, testing new technology free from regulatory consequences and fostering cooperation between regulatory bodies and FinTech.
RegTech for better KYC and compliance
RegTech becomes particularly useful when there is a bulk of data to deal with. Picture a situation where a bank has a million customers, and the government passes policy declaring that two extra fields need to be updated on each customer’s KYC documents. (such as Aadhar Card number and PAN number). Now, the bank needs to accept two million records, and in case of any defaulters, needs to identify them and act accordingly. If this task had to be done manually, it would be nearly impossible. RegTech comes to the rescue and digitally updates records easily and automatically. This enhances productivity in such cases by leaps and bounds.
The Fintegrate Zone Conclave
In keeping with India’s giant strides in financial technology, India’s biggest fintech conclave, Fintegrate Zone 2018, will be held in Mumbai from the 27th of February to the 1st of March. The conclave features CEOs, Directors, Market experts and company founders from sectors like banking, manufacturing, insurance, data analytics, technology innovation, etc. The event promises to be a holistic educational experience, and is sure to leave you with a clear idea of the business roadmap ahead, and how to go about fulfilling India’s management potential.
Click here to book your seats and for further details take a look at Fintegrate Zone’s website at http://fintegrate.zone/ and follow them on social media using the hash tag #FZ18.