The global financial crisis and subsequent recession happened almost a decade ago, but their legacy lives on, with more stringent regulations and bigger fines every year. The financial services sector has to comply, whilst also trying to build IT systems that are capable of gathering, organizing and interrogating massive amounts of data, to create reports for the regulators and the investors. It doesn’t stop there. Cloud services can add complexity and house data all over the world, and the increasing use of social media and other communication tools means that data that should be tracked and analysed is coming in fast from all angles.
RegTech is not new, but the increasing need for technology to meet these unprecedented challenges has created the right conditions for it to be currently seen as the finance sector’s silver bullet. RegTech covers a wide range of technology solutions which help firms meet regulatory requirements across various functions including reporting, risk management, identity management and control, compliance and transaction monitoring.
A number of vendors have surfaced around the globe, using different technologies to answer questions and help firms meet their regulatory requirements. Some, for example, provide blockchain analytics and intelligence – combining two of the most popular concepts in FinTech right now. Others have focused on the automation of anti-money laundering and new client due diligence, which Deloitte, in a recent whitepaper, shared that they believe to be at the forefront of the RegTech revolution. Taking a different angle altogether, other providers turn the lens on employees, analysing their behaviour and scoring risks accordingly. Yet, more offerings are grounded more in the traditional risk management camp, with stress testing solutions and big data analytics to calculate risk scores for the possibility of a disruptive global occurrence or the possible weight of a fine for non-compliance. Finally, automated reporting solutions are available to take some of the massive reporting burden away.
With such a complex compliance landscape, it’s no surprise that the supplier landscape is also so complex. It is crucial that firms can turn to scalable and efficient platforms and services which can reduce costs and span the myriad of data sources out there.
With the rise of artificial intelligence and machine learning solutions, coupled with the power of big data analytics and the flexibility and scalability of cloud platforms, it feels as though RegTech will only go from strength to strength. My concerns would, as always, lie in securing the systems and platforms themselves, and protecting the data that is housed within those RegTech systems. I’d love to see suppliers from the RegTech and cybersecurity worlds working closely and collaboratively for the greater good.