10/09/2020 12:37 PM

Regulation Technology - Fintech’s Next Big Reform?

The increase of a technology-driven economy and automatization of finance technology has made it easier to threaten the systems that run our everyday economy. Post-financial crisis reforms and stringent data privacy mandates have led to the evolution of financial regulations.

The digital nature of today’s world bridges the gap between traditional finance options and emerging technologies. For example, banks are using financial crime teams to monitor analytics to reduce fraud and detect suspicious activity.

Software companies are also partnering with credit card companies and various financial service providers to help make regulatory reporting easier. Regulatory technology, or Regtech, can reduce the risks in the automatization-fueled fintech world.

What is RegTech?

Investopedia defines regtech as the “...management of regulatory processes within the financial industry through technology.” Regtech includes:

  • Regulatory monitoring

  • Reporting

  • Compliance

Regtech companies help banks and businesses comply with regulations by using cloud computing technology. Cloud computing allows users to share data quickly and securely.

For example, a regtech company can analyze information from a bank with data from previous regulation failures to predict potential risks. The regtech firm can then present the data to the bank and point out areas to focus on.

Regtech tools can save companies time and money by breaking down complex information and providing an efficient way for entities to comply with a regulatory body or financial authority. The tools can also monitor online transactions in real-time and identify digital payment issues, minimizing data breaches and lost funds.

RegTech Companies

Regtech works within various circles of the financial space. Regtech applications seek to automate functions like employee surveillance, fraud prevention, compliance data management, and audit trails. There are several notable regtech companies, and each has a unique line of projects.

A regtech business will only collaborate with financial institutions and regulatory authorities with the same goals as the regtech firm. For instance, a regtech may offer an application that helps securely manage the consent to use customers’ data.

Regtech Solutions

Regtech can help financial services in a variety of ways. With each passing year, the regtech industry finds new ways to make regulatory compliance more manageable and efficient for institutions.

Today, you’ll find regtech solutions spanning from data management to quantitative analysis. Some of the offerings the regtech industry provides:

  • Anti-money laundering

  • Tax management

  • Customer analytics

  • Records management

  • Trade monitoring

  • Portfolio risk management

  • Reporting solutions

  • Regulatory change management

These solutions provide financial entities with the tools they need to comply, automate, audit, and manage vast, complex data.

Regtech’s goal is to help financial firms operate more efficiently through compliance of the law, which is why now, more than ever, regulators are embracing the regtech industry and what it has to offer.