RegTech in the fast lane: why simplifying regulation is increasing in FS
11 August 2017
Heralded as the new ‘FinTech’ by companies like Deloitte, RegTech seeks to use innovative technology to ease the regulatory responsibilities faced by banks and the financial services industry. The latest news from the European Banking Authority suggests it will be stepping up the scrutiny of new FinTech services, having already conducted investigations into crowdfunding and virtual currencies. This means that the role of RegTech within FinTech is more important now than ever before.
The intensification of financial regulation following the post-2008 financial crash has led to an increase in demands on the banks to capture, store and analyse huge amounts of data. While these regulations are crucial in ensuring that the financial sector does not repeat the mistakes it made 10 years ago, the processes in place are slow and often uncoordinated.
For bigger companies, the legacy systems in place can bring the wheels of innovation screeching to a halt. In addition to this, the costs of regulation can see some businesses being forced to slam on the brakes. It therefore comes as little surprise that the financial services sector is increasingly open to ways to changing and improving the way it works – which is why we are now experiencing a RegTech revolution.
Two businesses, Skry and Scorechain, provide blockchain analytics and intelligence, combining two of the most popular concepts in FinTech right now. Alacra and KYC 360 focus on the automation of anti-money laundering and new client due diligence. These global businesses, which were established all over the world from the USA to Luxembourg, highlight global demand for RegTech innovation. Taking a different angle altogether, British-based compliance software company Behavox, turns the lens on employees, analysing their behaviour and scoring risks accordingly specifically in the finance sector.
Each of these businesses demonstrate the breadth of slick, streamlined solutions for banks and FIs to help them cope with sector challenges, underlining RegTech’s innovation credentials. However, despite the large number of companies already on the market, RegTech is still only getting started. In a blog post, Accenture’s Peter Beardshaw states that, “Many firms continue to invest heavily in the area of cyber risk and … RegTech [will be] playing a greater role, with solutions becoming more sophisticated to help protect financial institutions.”
It is therefore likely that, as the Regtech sector continues to grow in dominance and popularity, we should see suppliers from the RegTech and cybersecurity worlds working closely and collaboratively for the greater good. Regtech has taken considerable steps in the last ten years, but it’s the next wave which will be crucial in establishing just how much of the regulatory burden it can relieve from the financial industry.