The 2010’s were the decade of technological change within Financial Services, fuelled by the financial crisis and a greater ability to embed new, exciting technology. You could also say it was the decade of regulatory change, where global regulators introduced a wide range of new regulations to support the changes in Financial Services. This wave of innovation, coupled with the growth of new global regulation, has led to a growing focus on how Regulatory Technology, or RegTech, can help to enhance compliance, manage its risks better and to help keep the organisation and its customers safe.
Regulators are no longer only expecting the minimum in terms of compliance from Financial Services organisations, but want compliance to be done in a more robust and manageable way.
RegTech is utilising APIs, machine learning and other technology areas to support with this innovative look to compliance, through ongoing monitoring and tracking of existing compliance and performing horizon scanning for upcoming regulatory changes.
- Risk Management
The number of risk areas monitored within Financial Services organisations is increasing, with conduct risk, climate risk and operational resilience playing a more prominent role in the overall management of risk.
RegTech propositions are now being developed to support these new risk areas, allowing for real time tracking of risks, managing end to end change management and assessing the impact of emerging threats to an organisation.
- Regulatory Reporting
As previously mentioned, there is an increasing demand from regulators who additionally are asking for more comprehensive reporting around this.
The increase in data sources, and its distribution across organisations, and innovation in reporting capabilities through big data analytics and cloud, has helped RegTech to revolutionise and automate how you report to the regulator.
- Identity Management & Control
As Financial Services continue to be digitised, ensuring we have a quick and reliable way to perform due diligence and Know your Customer (KYC) checks, anti-money laundering (AML) and anti-fraud detection becomes crucial.
New entrants to the market, such as challenger banks, have shown that identity checks / controls can be greatly enhanced through RegTech that allows for electronic & automated checks - resulting in a dramatic decrease in application times whilst maintaining the controls and checks required.
- Transaction Monitoring
Ensuring the safety of customer finances as well as making sure there is no suspicious activity happening during transactions (either internally or externally) is as important as ever.
The expansive growth in data held on transactions is leading to a revolution in transaction monitoring, utilising big data analytics, machine learning and AI to facilitate transaction monitoring and sanction screening in real-time. Other RegTech areas such as Blockchain are built with transparency and auditability in mind, resulting in easy transaction monitoring for organisations.
RegTech in the future
As we move into the new decade, RegTech is going to be a key factor in the growth of digitisation in Financial Services, highlighted by a recent report that predicted the global RegTech Market is set to grow in size from around £5 Billion in 2020 to almost £13 Billion in 2025.
As the last 10 years of Financial Services innovation has shown, it’s no longer the case of if RegTech will make a lasting impact, but when. Where do you think the biggest RegTech innovations of the next few years will be?