What is regtech and why do we need to know about it?

Alan Goode|06 December 2017
What is regtech and why do we need to know about it?

In an attempt to reduce the ever-increasing burden on their compliance teams, financial service organizations are starting to turn to new technology solutions like machine learning and cloud computing. The collective name for these solutions that is now entering the industry vernacular is regtech, short for regulatory technology. In this blog, we will explore some of the potential use cases for regtech products.

  1. Compliance
    Companies are under pressure to deal with growing levels of financial regulation. Compliance regtech enables organizations to monitor and track their current state of compliance in real time. Providers such as compliance.ai leverage machine learning and artificial intelligence (AI) to streamline an organization’s compliance function.

  2. Identity management and assurance
    This category is heavily linked to anti money laundering (AML) and know your customer (KYC) procedures. AML refers to laws and regulations designed to stop the practice of generating income through illegal actions, while KYC is the business process of identifying and verifying your clients. Identity management and assurance regtech solutions include identity proofing where physical identity documents can be used to verify a customer’s identity and provide a higher level of assurance that a customer is who they say they are.

  3. Regulatory reporting
    Regulatory reporting is the submission of information needed by regulators to evaluate an organization’s operations and overall health, determining its compliance status with applicable regulatory provisions. Regtech enables automated reporting through techniques such as big data analytics.

  4. Risk management
    Risk management is the identification, assessment and prioritization of risks followed by coordinated application of resources to minimize, monitor and control the probability or impact of unfortunate events. Regtech offers to support risk management through the detection of regulatory risks, assessing current risk exposure and anticipating future threats.

  5. Transaction monitoring
    Transaction monitoring is a crucial element of regulatory management with links to AML. Many of the world’s financial regulations already explicitly reference transaction monitoring, including the New York Department of Financial Services, BaFin in Germany, and the Australian Department of Foreign Affairs and Trade. Regtech solutions can assist with real-time transaction monitoring and auditing. There has also been research activity with a view to leveraging distributed ledger (blockchain) technology for the monitoring of transactions.

This year saw an explosion of new services and service providers that focus on streamlining the way companies manage their regulatory requirements. Faced with this growing menu of potential regtech partners, financial service organizations would do well to select one whose technology has a proven track record of success, and which adheres to all international compliance mandates.


About the author

Alan Goode

Alan Goode

CEO and Chief Analyst Goode Intelligence

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