The financial services industry has seen explosive growth in what has become known as FinTech (Financial Technology).  As regulatory requirements increase, a more specific set of technologies – known broadly as RegTech (Regulatory Technology)—is helping financial services firms comply with new rules.   Like FinTech, RegTech uses emerging digital technologies such as robotics, smarter analytics, cognitive engines, cloud, and distributed systems, among others, to create cost effective business models and facilitate better and more efficient compliance.

Benefits derived from RegTech include the realization of near-real time reporting capabilities, calculation and eligibility services, process automation, development of infrastructure to handle increased data volumes, and improvements to data sharing capabilities, all while maintaining security and client confidentiality.   We believe, however, that the full potential of RegTech is realized, not when new technologies are dropped into existing processes and operating models, but when RegTech solutions are deployed to solve business problems or deliver significant improvements in service.

While RegTech shows great promise, providers face a number of challenges in developing cost-effective offerings that add significant value for the purchasing institution.  Two examples of this are 1) the challenge of harmonizing the global regulatory environment to create a common set of rules and 2) the challenge of accessible guidance for institutions interpreting regulatory requirements.  Providers can reduce costs and increase potential revenue opportunities if they can offer scalable solutions that can be re-used across multiple jurisdictions and geographies.  Some local customization may be required, but increased harmonization should allow RegTech providers to leverage core components across regulatory jurisdictions.

Similarly, we see developers devoting a disproportionate amount of resources to understanding new regulatory requirements.  This is especially tough on start-up businesses, which are often short of time and money.  Lightening the burden of the “understanding” phase could help support a more vibrant RegTech ecosystem.

In this blog series, we will be examining these challenges in more detail and also looking at ways that financial institutions, regulators and developers can foster the continued growth and adoption of RegTech.


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