RegTech solutions

RegTech, a portmanteau of Regulatory Technology, refers to technology that ensures regulatory compliance in banking and financial services. The three key areas where RegTech is applied are:

● Monitoring
● Reporting
● Compliance

Whether through a bespoke solution or a platform one, RegTech helps banks and financial services businesses:

● Reduce the need for increasing headcount to maintain regulatory compliance
● Optimize regulatory compliance costs and improve the associated processes’ efficiency with automation
● Identify potentially fraudulent activities in real time and more accurately with predictive analytics and other technologies
● Gain real-time insights into every aspect of operations with solutions for real-time liquidity management, reconciliations and more

In our professional opinion, an effective RegTech solution is one that allows our client to attain the set goals vis-à-vis efficiency, cost optimization and so on. To that end, it should employ an ensemble of technologies, such as:

● Big data. It enables the solution to process and analyze swaths of data at exceptional speeds
● Artificial intelligence (AI) and machine learning (ML). These two technologies excel at risk modeling and stress testing, fraud detection and intelligent know your customer (KYC) automation
● Robotic process automation (RPA). It’s a cost-effective solution for automating routine, rule-based tasks, such as data entry and verification
● Open APIs. They allow for securely acquiring data from connected devices, such as sensors, and using biometric data for authentication and fraud prevention
● Cloud computing. Without it, it’d be impossible for the solution to run complex calculations or embed technologies like predictive analytics and big data

With over 2,000 RegTech solutions saturating the market as of 2023, it’s become increasingly difficult to select the right product. Here are the three key considerations we advise banks to keep in mind when navigating the RegTech market:

● The solution has to meet organizational and compliance needs, which depend on the bank’s size, existing software stack and jurisdiction(s)
● It has to be in the appropriate price range, with all cost structure components from hosting to management taken into account. Costs should be predictable and transparent
● It has to rely on the technologies that maximize the solution’s longevity, enable stable performance, and ensure compatibility with the legacy estate. They should also correspond to the skills of the in-house management and maintenance team

If you envision the move to the cloud for your RegTech estate, make sure you take the following into consideration:

● Legacy estate. Analyze whether your legacy estate’s age and technologies may get in the way of migration and review or draft up a cloud and governance policy
● Data management. Ensure the data will be well governed and secure during and after the move to the cloud. Consider regulations towards security and privacy here as well
● Vendor. Choose your vendor wisely: Pay attention to aligning the functionality, privacy and security practices with your needs and preferences
● Jurisdiction-specific regulations. In some jurisdictions, regulatory requirements towards cloud-based RegTech are already detailed and strict. In others, they remain general or non-existent
● Costs and risks. Estimate not just the migration costs, but also the running costs of your RegTech solution in the cloud, as well. Don’t overlook potential risks and their mitigation routes