Emergence of Regulatory Technology: Banks are Set to Benefit!

Banking CIO Outlook | Wednesday, August 14, 2019

Service providers are transforming how banks do compliance with advanced technology-enabled solutions.

FREMONT, CA: Regulations have always been a talking point in financial institutions. With banks adopting new technologies and incorporating them into business operations, regulatory compliance requirements are also changing. The regulations in today's age have been designed, keeping in mind the high-risk environments in which financial institutions function. It is often seen that financial institutions find it tough to balance regulatory compliance and high revenue generation. Thus, there is a requirement for services and solutions that can lead to ease of compliance. Regulatory technology providers are now emerging to cater to this demand from banks.

Compliance is vital to minimize risk. Regulatory authorities frame laws to standardize businesses in a way that safeguards the customers' resources as well as data. Cybersecurity issues have been rising, and this makes regulatory compliance even more crucial. Non-compliance is not a feasible option for banks as the stakes are high. Banks have to pay huge penalties if found negligent. Customers are also aware of the importance of compliance, and thus, news of non-compliance can hit the reputation of a bank badly. Many other challenges make things difficult for banks include the high overhead costs on production and deployment of solutions every time there are modifications to regulations.  

Emerging regulatory technology companies are now here to ease the burden of compliance, improve insight, and enable better opportunities for revenue with technology-driven solutions. The solutions are available in the form of APIs and SaaS models. Using these, banks can manage the high –complexity, stringent regulations seamlessly. Dedicated solutions not only facilitate compliance management but also minimize risks and costs. For any banking firm, around 10-15 percent of the workforce is devoted to managing compliance. By adopting solutions, banks can cut down on these numbers and save resources. Automating the systems from the regulatory perspective can be extremely advantageous.

A vast array of advanced technologies that include artificial intelligence, big data technology, blockchain, machine learning, and cloud computing, among others, are supporting regulatory technology companies in crafting the solutions. A correct combination of all the technologies creates immense opportunities when it comes to managing the complex operations and metrics of a banking institution. However, the ultimate goal that most banks might look forward to is the automation of the regulatory process.

There are a few basic processes that a service provider looks to streamline in a quest to make compliance simpler. These happen to be onboarding, monitoring, detection, and reporting. Signing up new customers should include strict verifications. By automating data and identity verifications with machine learning and artificial intelligence, banks ensure that only legitimate customers are accepted into the company. Analyzing ongoing activities with regulatory technology solutions enables banks to figure out issues and risks in real-time.

Regulations often make it imperative for banks to accumulate, store, and analyze data. Management of such vast amounts of data requires computing power as well as compliance with governing bodies. With regulatory technology solutions, data management is more efficient, transparent, and standardized. There is an added advantage of superior analytics tools, as well. Risk management with predictive analytics makes for a great combination as it allows banks to map risks and create secure models that are intelligent and compliant.

Thus, regulatory technology companies provide comprehensive coverage across the compliance landscape. From enabling evaluation of current regulatory status to discovering loopholes dynamically in real-time, technology solutions do it all. With fast, accurate, and automated ways of enforcing compliance, banks can now be prompt with regulatory management without worrying about high overhead costs and infrastructure maintenance. Every functional channel in a bank can now be highly optimized in a way that addresses integrated compliance requirements.

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