Significance of RegTech in Banking

Regtech in banking offers promise in the face of increasingly complex regulations. Therefore, financial institutions should develop strategies to deploy holistic models helping banks and financial institutions build and keep a competitive advantage.

FREMONT, CA:Regtech has begun to gain momentum in the banking industry by significantly managing compliance costs and creating opportunities to gain a competitive advantage while delivering customer-centric innovations. The banking sector, burdened with regulations, has reduced its challenges by adopting new technology solutions. Today, the financial sector is experiencing significant transformations. Businesses are challenged to adjust to extensive regulatory changes as they impose high complexity and stringent timelines.

RegTech built a strong foundation within the fintech ecosystem to overcome the challenges. It introduced solutions for new and complex regulations, litigation, and other regulatory concerns faced by banking institutions. There is a necessity to replace the current legacy solutions used by banks to meet the stringent requirements implemented by the regulators. As a result, regtech in banking offers coherent ways for banks to meet these needs without rebuilding their existing models. Regtech facilitates compliance management in banking and also minimises regulatory risks. Regulatory technology can be used in different ways in the banking sector.

Regulatory Reporting: Big data analytics and real-time reporting can facilitate data distribution and regulatory exposure.

Identity Management and Control: RegTech enables counterparty due diligence and KYC procedures, anti-money laundering, and anti-fraud screening. This helps with identity management and control.

Risk Management: RegTech assists in detecting compliance and regulatory risks, assessing risk exposure, and anticipating future threats.

Transaction Monitoring: It renders solutions for real-time transaction monitoring and auditing. This leveraged the distributed ledger benefits via blockchain technology.

Financial institutions encounter numerous challenges that can be handled better by collaborating with RegTechs. These challenges have caused a widespread adoption of regulatory technology. These barriers include frequent new financial regulation additions, amendments and modifications on existing regulations, huge overhead costs in solution production and deployment to comply with regulations, penalties for non-compliance, and issues arising from incompatible systems and a non-standardised approach.

These challenges become more complex, therefore financial institutions should have a long-term, technology-driven platform to ensure end-to-end governance and proper regulatory compliance.

Regulators expect banks and financial organisations to be more active in detecting, preventing, and remediating compliance issues by themselves. Banking and financial institutions can greatly benefit from leveraging regtech. Such advantages include the ability to streamline operational processes, integrate solutions faster, remain compliant with regulations, simplify data management and reporting, provide real-time reporting, reduce the time for client onboarding, identify fraud, and improve data collection and analytics.

Regtech in banking presents many promises in increasingly complex regulations. The financial institutions should develop a proactive strategy and advance themselves to deploy holistic models to help banks and other financial firms establish and maintain a competitive edge.