How could the RegTech revolution help you?
Financial institutions have faced ever-increasing regulatory pressure over the past 10 years. The cost of compliance has surged, particularly for global companies operating across multiple jurisdictions.
On top of this, the wider market is challenging. Margins are slim, competition is intense and political uncertainty is feeding economic and financial market volatility.
Financial institutions are turning to RegTech – Regulatory Technology – to fill compliance gaps, reduce costs, and get ahead of requirements and detect risk before the regulators do.
Compliance, cost and complexity are key drivers and by 2022, spending on RegTech is forecast to reach $76bn – up more than seven-fold from $10.6bn in 2017, according to Juniper Research.
RegTech uses technologies such as advanced analytics, robotic process automation, cognitive computing and the cloud to achieve regulatory and compliance outcomes more efficiently and effectively.
By combining workflow automation and robotics with advanced analytics, a European bank automated credit decisions to reduce approval time for existing customers from two days to a few minutes. The number of credit office employees required to handle the transactions halved as a result – and customers received better, faster service.
To combat financial crime, another bank wanted a scalable solution to review 400,000 SME customers, gain a holistic view of risk and establish a robust audit trail. The company adopted a cloud-based solution that halved the time required for a customer review, improved monitoring of financial crime and enhanced the bank’s understanding of customers’ business activities.
Getting on board
Regulators worldwide are exploring how they can apply technology to their own processes, as well as how technology can increase efficiency and relieve the burden on firms.
In the future, companies should expect mandatory requirements for technology that let regulators scrutinise their data more effectively.
RegTech is no longer a buzzword; it can be applied and its benefits realised today. As well as helping to reduce the cost of compliance, RegTech has the potential to improve service and protection for customers – and to help restore trust in the industry.
Chris Steele is Director Banking Risk and Regulation, KPMG UK.