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RegTech - Changing the regulation landscape

What is the most significant challenge the financial services industry faces today? It is complying with ever-changing regulations. Non-compliance leads to cancellation of license, significant penalties, legal issues, and sanctions. Utilizing technology to meet the regulatory requirements like automating tasks, reducing operational risks, and reporting obligations is the need of the hour.  

The financial industry is increasingly looking at technology-driven transformation in regulatory affairs, popularly known as RegTech, to deal with the new directives and regulations. The global market size of Regulatory Technology (RegTech) was $1.37Bn in 2018 and is likely to reach $6.42Bn by the end of 2025, with a CAGR of 24.7% in 2019-2025*

In the banking sector, there are multiple domains like Loans & Mortgages (Agri Finance), Payments, Investment banking that need extensive compliance reporting like TILA, RESPA, HOEPA, SAFE, FHA, HMDA, CCPA, SEPA, GDPR. 


Below are the significant regulatory challenges the financial industry face

  • Comply to Regulators
    • Respond within stringent timelines, protect brand and reputation
    • Frequent additions of regulations
    • Modifications to existing regulations
  • Process lines – Gaps in compliance parameters
  • Operations – Reduce costs, manage inefficiency in manual process
  • Consumer protection – Implement solutions which enhance customer protection
  • Non-standardized approach, incompatible systems, insufficient integration of systems

Further, regulators come up with complex requirements that may not meet current legacy solutions used by banks.



RegTech solutions offer 

  • Deployment of highly automated, scalable methods to extract and integrate data from bank systems, third-party data providers and other sources.
  • Cloud as well as on-premise remote and secure maintenance, management, and sharing of data. This leads to
    • Reducing the time needed for client onboarding
    • Identifying the frauds
    • Adapting to new regulations faster
    • Improve data collection and data analytics

Impact of technology

Rising technologies like AI/ML, Predictive Analytics, Chatbots are applied in the following regulatory compliance areas

  • Real-time reporting – Automation of reporting and compliances processes
  • Risk Management – Assess exposure to risk and anticipate future threats
  • Identity management and control – Customer due diligence (KYC) and money laundering, tax evasion (AML)
  • Transaction monitoring – Real-time monitoring and auditing
  • Trading compliance - Bots to facilitate real-time queries on trades

Blockchain & the evolving RegTech landscape

Blockchain is reinventing the regulatory space with applications in the areas of customer onboarding, fraud, and risk management. With blockchain, they can store, track, and retrieve data any time, anywhere. With private blockchain, institutions can own the entirety of information as transaction data flow back and forth in real-time while ensuring data security. 

The potential of RegTech is vast and mostly untapped. Indeed, with a greater focus on data and associated regulatory obligations, banks are increasingly looking at tech enablers to gain value out of RegTech investments and solutions. 


Author: Santhosh Srinivasa, Banking and Financial Services , EVRY India

* :  Source from PR Newswire