RegTech, as the term suggests, is referred to technologies which are involved in making businesses regulatory compliant. As defined by the Financial Conduct Authority (FCA) of the UK, RegTech is the process of adopting technology in order to stay ahead of any compliance regulations. The implementation of RegTech enables businesses to monitor regulatory obligations at regular intervals, and assess compliance with the current regulations. Similar to Fintech, Paytech, and Insurtech, the RegTech space is also steadfastly transforming, thanks to the rapid technological advancements in the industry.
What led to the RegTech wave?
The development of RegTech dates back to 2008, when the financial crisis, teamed with the strict business regulations hindered the growth of businesses.
The government levied unreasonable penalties and fines on banks provided they were unable to comply with the newly proposed regulations. It was then that banks and other financial institutions decided to focus more on risk management activities and compliance aspects, in an effort to mitigate the impact that the penalties and fines had on the organizations. After the FCA officially adopted RegTech in November 2015, via an announcement in the Call for Input, The Institute of International Finance (IIF) established a working group for RegTech.
Why is RegTech so important for modern businesses?
The key features of RegTech make it one of the most inevitable solutions for modern business needs. To begin with the benefits of RegTech, reports are configured as well as generated at a high speed. Businesses can integrate and operate almost any solution in a shorter period. Leveraging the Extract Transfer Load (ETL) technology, companies can de-clutter data sets, thereby facilitating easy data analysis. This makes way for easy decision-making processes, with a bigger understanding of data and unlocking its full potential. That is not all; RegTech empowers businesses to utilize the same data to achieve multiple objectives.
The technologies leveraged in RegTech:
The technologies utilized in the RegTech industry are cloud-based; most technologies need to be responsive and flexible to the changing IT landscape and regulations. Companies which have adopted RegTech require these technologies in order to stay ahead of the competitive curve:
• Big data, including current techniques deployed in data visualization
• Blockchain technology, which is imperative for secure information sharing, both within and outside the organization premises.
• Interpretation of unstructured data via machine learning. This kind of data includes social media posts as well as emails, along with data received from biometrics and Application Programming Interface (API).