- August 9, 2016
- Posted by: SivaShankar M
- Category: Fintech
Meet “Regtech” – Fintech’s favourite new child!
When technology decided to snuggle up to the regulatory journey of financial institutions, Regtech was born. The idea of using technology to combat regulatory challenges is not new, but “new” Regtech comes with a strong wave of agility that makes heads turn.
The Evolution of Regtech
The compliance challenge is one of the toughest tussles fought in the financial sector! Have a look at the global regulatory statistics below.
JP Morgan Chase spent $600 million on regulatory technology and added over 10,000 employees to manage its compliance issues in 2014 at a cost of $2 billion.
In the same year, Deutsche Bank spent 1.3 billion Euros to keep up with the regulatory industry’s regulatory demands and UBS for the same reason spent $946 million in 2014.
The regulatory bug hasn’t spared the insurance industry too. The European insurance industry has spent between $5.5 and $6.6 billion in 2012 to establish compliance with the new regulations.
Clearly, regulatory compliance in the financial industry is one of the most time and resources- consuming elements and this has laid the base for the adoption of technology. Nevertheless, the trend was further aggravated by the financial crisis when Governments and regulators became more stringent about the reporting systems and the use of financial data.
Did Fintech nurture the growth of Regtech?
As banks and other financial institutions where fighting their way up to handle the changing regulatory landscape, the boom came to Fintech! Fintech companies offered exciting services and technological solutions that disrupted the conventional methods of monetary transactions introduced multiple low-cost alternatives and enhanced the speed of processing payments. Open source technology and the cloud adorned a more mainstream position and several independent players emerged through the competitive finance market.
Obviously, this gave rise to newer levels of regulations and compliance policies that varied drastically with different verticals and geographies. While Fintech companies where busy feeding the innovation monster, the Regtech sector took shape to handle the new developments built by Fintech!
Thus Fintech in a way bore the fruit of Regtech in the BFSI sector!
How does a Regtech investment add more value to your organisation?
FirstRand Bank, a London-based subsidiary of a South African financial group uses Regtech solutions to streamline its reporting systems to meet the requirements placed by Bank of England.
Then there is the Taiwan Business Bank which uses the advanced regulatory platform from Wolters Kluwer to support its business with greater scalability.
At a recent event conducted by the Institute of International Finance at Madrid, Regtech was recognised as one of the strongest upcoming trends and popular banks like ING and BBVA came out in the open about how they strongly believe that their Regtech investment will be the best solution to reduce the time to market for all important financial products.
In fact, a study published by a renowned marketing consulting firm, Market Fintech, indicates that more than 189 financial institutions worldwide have invested in Regtech solutions in just the past couple of years.
These numbers clearly indicate the potential of Regtech in the BFSI sector and are a proof that Regtech investments are a significant tool to build a strong competitive advantage in today’s fragmented regulatory landscape.
In short, Regtech will make the world of compliance less complex, free up capital from compliance management to be used in other productive areas of the business and improve the efficiency of customer service.
Is your company ready for the Regtech era?
Traditional banks that once considered Fintech as a threat, have now adopted technological solutions and products to build a sustainable competitive advantage for their business. Regtech is expected to travel along the same lines as it can strongly enable innovation and build greater customer confidence too. In order to be a successful Regtech adopter, here are a few guidelines to be followed.
Step 1: Understand the various Regtech solutions in the industry (refer infographic below) and identify the areas within your business that can best benefit from those solutions.
Step 2: To embed a Regtech solution into your business landscape, you need to test the “buy-in” factor at various levels of the management. Additionally, the existing infrastructure and market position must be thoroughly understood to embrace the change successfully.
Step 3: The impact of the Regtech solution on various aspects of the business such as the organisational culture, existing legacy systems, budgetary constraints and ROI must be analysed.
Step 4: Assess the people factor and check if you the required expertise to manage the change and deliver results.
Habile Technologies can offer recommendations and due support to early adopters of Regtech and play along efficiently from ideation to implementation of innovative solutions.