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Understanding RegTech

Understanding RegTech

With technology blowing our minds away daily, we are constantly made privy to new worlds and systems. One such upcoming field of innovation is RegTech or Regulatory Technology. As the prevalence of Fintech increased and became popular in an enlarging ecosystem, Fintech industries also found it hard to cope with multiple regulations, laws, and rules that they must enforce and adhere to. This included everything from security to customer management and fair financing. This is where RegTech steps in! RegTech is a niche financial process that helps Fintech industries streamline the regulatory process. It became a game-changer for financial institutions (FI) as the regulatory instructions became complex and stringent with time.

How does RegTech help Financial Institutions: 

  1. Updated about the news additions of financial regulations by the government
  2. Keeps the FI informed about circulars/modifications on existing regulations
  3. A cost-effective solution in terms of data management & reporting 
  4. Increases the efficiency of automation and digitization to meet the pace of regulatory changes
  5. Provides standardized approaches, and compatible systems to meet the regulations.
  6. Long-term, technology-driven platform
  7. Gives real-time reporting with data analytics 
  8. Protects FIs from fraud and includes risk management

RegTech uses innovative and improved tech services like AI, Blockchain, and Cloud Computing to provide sustainable financial products. They are constantly updated and proactive in working with new evolving regulations and understand a FI’s deepest needs.

Types of RegTech:

Types of RegTech:

  1. Client Identification: Helps FIs gather and process information on prospective and current customer databases. This includes background checks like Know Your Customer(KYC) and Anti-money Laundering (AML). 
  2. Monitoring: Monitors ongoing transactions to identify whether an FI breaches any regulations and displays signs of suspicious activity
  3. Reporting: Helps FIs fulfill their regulatory reporting obligations. This includes collecting, processing, and submitting internal data to the relevant authorities.
  4. Data Protection: The General Data Protection Regulation ensures compliance and protection of personal data.  It offers protection from data breaches and cybersecurity threats. 
  5. Data warehousing and analytics: This sub-tool of Regtech helps companies store, sort, and analyze vast quantities of data required for legal procedures. 
  6. Legal and Regulatory Analysis: This monitors and interprets existing and emerging regulations to help financial institutions identify gaps or areas of non-compliance in their internal setup. 
  7. Training: Educates FI about laws and policies related to their work functions.
  8. General Compliance: An overall category that covers all RegTech which does not fall into any of the above categories, like forecasting and risk modeling.

Financial institutions usually pick various solutions to manage their specific needs. RegTech is not just a fancy tool but over time has become a vital necessity. It assists companies to operate in compliance with the law, avoid costly errors, and streamline the process. With growing threats, frauds, and complexity the use of RegTech only increases with time. 

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