RegTech solutions and compliance transformation: The new frontier

Amidst rising compliance costs, disruption to the financial sector via FinTech and an increasing reliance on data analytics, RegTech and the solutions it affords have risen to the fore. At its core, RegTech creates added value for financial services firms looking to benefit from the enhanced flexibility, speed and analytical capabilities that a digital compliance function enables.

The case for compliance transformation

Increased regulation and challenging regulatory expectations have a significant operational impact on companies that require staff, technology, and process-based solutions. In respect of new regulation and legislation, these create challenges around comprehending, implementing and embedding new requirements. With ever-increasing legislation, there are also potential challenges to understand and manage these risks.

The emergence and growth of FinTech, the big brother of RegTech, has proven to improve customer and operational engagement capabilities by leveraging digital functions, data management, and analytics and has been embraced by the UK government with aims of the country remaining at the cutting edge of digitalising finance. By creating an FCA ‘scale box’ and Centre for Finance, Innovation and Technology to boost growth, a central bank currency to support new technologies and infrastructures, as well as plans for capital market reform to enhance an open and dynamic financial centre, Chancellor Rishi Sunak has firmly demonstrated the government’s commitment and vision for the UK’s FinTech industry.

According to Deloitte, ‘RegTech is the new Fintech’. Undoubtedly, RegTech will also benefit from these ambitious plans and investment, as organisations are looking to enhance time-consuming and labour-intensive processes, redeploying compliance experts to provide greater insights, assessments and analysis and less time researching and monitoring policies which can be automated.

FundRecs’ CEO, Alan Meany describes RegTech as follows: As the various examples on XXXTech combinations like PayTech and FinTech, RegTech are a great example of an industry that is changed through software. At all financial levels, there have been technologies implemented but with RegTech the gap has been filled between non-software and software-enabled services.

RegTech’s key characteristics are its analytical tools, easy integration, speedy report configuration and generation, and agility.

Delivering RegTech solutions

RegTech shows promising growth, and the question is whether it is the solution for all and any compliance challenge. It is not all-encompassing though as various other factors are being considered in risk management. Areas where it works well include information-based obligations, heavily quant-based obligations, risk management and identifications tools like:

• Case management tools
• Risk data warehouses
• Training tools
• Activity monitoring tools
• Regulatory monitoring tools
• Transaction reporting tools
• Management information tools
• Health check tools
• Compliance universal tools regulation/legislation gap analysis tools

While the real value of RegTech and these tools are yet to be determined according to Deloitte Risk Advisory partner, Sean Smith, in the short term, it will aid in the automation of mundane compliance tasks while effectively reducing operational risks associated with meeting report and compliance obligations. Long-term results are empowering compliance functions in making informed risk choices that are based on the provided data about compliance risks it faces, as well as how it manages and mitigates those risks.

Examples of RegTech companies and compliance technology solutions

One of the top RegTech examples is FundApps, a London-based company founded by Andrew White in 2010. He aims to have his reporting solution and compliance monitoring Cloud-based while maintaining a compliance expert team that updates the platform with new emerging regulations. Other RegTech examples include Silverfinch which provides asset managers with a single solution for portfolio holdings data in a cost-effective, secure, and reliable manner.

The bright future of RegTech offers an opportunity for industries developing this type of technology for full automation. This will enable an entire spectrum of control management and regulatory assessment while bringing control and clarity to a vital business area that is otherwise time-consuming and cumbersome. Looking at the impact that it might have on talent acquisition and skills development, no company should be scared of the new. Human intervention that provides the final arbitration is always required.

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