By Mary Grady, a brief primer for those who have heard the expression but wondered what it actually meant. You can of course learn more by coming to our event on October 26th at UCD (get your tickets here), and if you know a relevant Irish Fintech company then encourage them to enter here asap.
— Simon Cocking (@SimonCocking) August 20, 2017
What is it all about?
RegTech has been around since approximately 2015, and is derived from ‘Regulatory Technology’. This play on words was coined by the Financial Conduct Authority in the UK who have long supported the use of innovative new technology in the Financial Services industry.
RegTech is considered to be a sub-set of Fintech which focusses on leveraging new technology to offer better financial services for both businesses and consumers. Cyber- attacks, data protection laws, and financial irregularities present real challenges and need to be managed, therefore, it is hardly surprising that the industry has become more regulatory driven.
Why do we need it?
Every financial crisis acts as a catalyst for increased regulation. Consideration must be given to the fact that financial institutions must be responsive to these regulatory requirements. Globally, compliance is increasingly, becoming the most time consuming and resource heavy activity for these institutions. RegTech solutions offer the opportunity to automate elements of compliance and to mitigate risk.
Everyone is a winner. Leveraging technology to this end, offers benefit to both financial institutions and regulatory bodies. Compliance automation facilitates Banks by reducing human errors and more accurately reporting to governing authorities assisting them in not falling foul of those regulatory authorities. It also significantly reduces cost and effort required to perform these tasks. Governing bodies also win as, identifying risk and monitoring is supported through the heightened granular reporting accuracy which can be recovered almost instantaneously.
Will one RegTech solution fit all?
There is no one type of RegTech solution, in truth there are many offerings available. When thinking of RegTech, it must be accepted that it covers a wide variety of technologies. It continues to be about how information is managed and analysed but RegTech solutions vary depending on what regulatory requirements are to addressed. Compliance, reporting, anti-money laundering and much more need to be taken into account. However, there is a common denominator in that, cloud-based technologies should be a pre-requisite in terms of both flexibility and responsiveness in this booming global finance sector.
Should we continue to invest in RegTech?
In essence, most individuals and most business are becoming more tech savvy. However, so too, criminal activity is becoming more innovative and more technologically smart. It is said that technological knowledge is doubling every 18 months. Take a minute to absorb that!
So yes, we must remain proactive and keep investing in RegTech. While it may not always prevent gaps and irregularities, it does continue to offer some transparency in the industry.
Due diligence automation must remain up front and centre in the global finance arena. In a world of ‘Big Data’ and criminal interference, or mismanagement through institution indifference, consumer and business protection is key, in terms of fraud and consumer identity. In conclusion, greater regulatory oversight though possibly cumbersome for institutions to manage can only enhance regulatory compliance, and safe guard consumer and businesses. The duty of the financial industry to respond to the changing landscape of regulation will only increase. RegTech will evolve with new emerging technologies, but take comfort in the fact that it is here to stay.
Beall, A. (2017). What is regtech? The latest wave of startups hitting the fintech industry. [online] WIRED UK. Available at: http://www.wired.co.uk/article/regtech-next-fintech [Accessed 31 Aug. 2017].
FCA. (2017). Innovate: RegTech. [online] Available at: https://www.fca.org.uk/firms/innovate-innovation-hub/regtech [Accessed 31 Aug. 2017].
NEWS BBVA. (2017). 10 keys to understand what regtech is all about – BBVA NEWS. [online] Available at: https://www.bbva.com/en/10-keys-understand-regtech/ [Accessed 31 Aug. 2017].