Your Key To Success: Choosing Adequate Regulatory Technology

Since the last decade, regulatory technology has gone from unheard of to becoming integral to every company's regulatory and compliance arsenal. But which emerging innovations in this field stand out as the future unfolds?

RegTech is an industry that is rapidly expanding, with its market share increasing each year. According to recent studies, RegTech is expected to reach a worth of $28.33bn by 2027,?and more businesses are turning to regulatory technology solutions than ever before, some because they are obliged and some for their own business protection.

What Is Regulation Technology Or RegTech anyway?

Initially coined in 2015 by the UK's Financial Conduct Authority(FCA), the term RegTech is defined as "regulatory technology is a subset of financial technology that aims to improve upon present methods of meeting regulatory standards." This umbrella phrase describes anything that can be used to assist a company in complying with the law.

The expense of maintaining regulatory compliance has grown as the regulatory landscape has become more complicated. We often hear businesses complaining about overregulation...

Heavy penalties for noncompliance with regulations have also been levied. Since the 2008 financial crisis, CB Insights reports that businesses have paid fines totaling $321 billion.

Consequently, businesses are looking for methods to lessen the likelihood of violations.

What Triggered the Birth of RegTech?

Regulations concerning technology and information reporting skyrocketed after 2008. This trend of ever-increasing rules and regulations has persisted for decades.

While this was happening, the financial services industry started going digital. Customers have welcomed the growing adoption of digital, which has led to higher revenues and more dynamic customer relationships. Still, it has also spawned new regulations aimed at preventing data breaches, minimising cyber-attacks, stopping money laundering, and promoting anti-fraud activity.

There was a dire need for innovative strategies to raise regulatory consciousness and reduce risk in the financial services industry. Traditional methods of dealing with tedious procedures, such as AML compliance and KYC, were expensive and unsustainable. Existing technological solutions could not provide accurate analytics and oversight because they did not integrate different systems and lacked real-time responsiveness in light of the exponential growth of data.

The Current Dilemma: Numerous RegTech Alternatives With Unclear Business Models

As a Compliance Officer with more than 15 years in the profession, I have seen and tried it all. Well, most of it...The challenge of finding adequate regulatory technology (RegTech) for businesses can be daunting and lacks transparency. There are many options with not-so-transparent business models, pricing, and packages, including hidden costs and complex dashboards. This makes it difficult to determine which RegTech best suits a particular business's needs without sacrificing efficiency or effectiveness. We as Human beings also tend to be cautious, even skeptics, when it comes to automation and machine learning that we don't understand. The only constant is the change, and yet we strive to keep our excel sheets and paper copies of everything. In the compliance profession, there is an embedded lack of trust, where putting your data and reliance on a third party, a technology company, means stepping out of your comfort zone.

Smaller companies can not afford it, and big companies think it's too good to be true... or that they are better off developing in-house solution; the truth is one-size-fits-all doesn't work when it comes to RegTech.

Finding the right RegTech requires careful consideration of several factors to make an informed decision. Companies must understand each option's features and any additional fees that may be included, such as service costs or subscription fees. Additionally, they should consider how easy the platform is to use and whether its dashboard provides a clear view of all relevant data.

An Effective Solution: Adequate Research, Market Assessment, Fact-Checking, and more

When it comes to regulatory technology, there are many challenges businesses and organisations face when deciding what is adequate. For those looking for a solution, some suggestions can help businesses assess what is in the markets, facts, and features to consider and look beyond the product itself.

Adequate research should be done before any decisions are finalised and contracts signed. Companies should ensure they understand the industry's trends, objectives, and expectations of regulatory compliance. This includes research on current market offerings to ensure they cover all aspects of regulation management. Additionally, companies should look into how different vendors measure up in terms of performance, security measures, customer service, scalability and cost-efficiency. Moreover, analysing facts and features can better understand whether a certain provider has what it takes to meet regulatory standards.

Some of the questions to ask:

Is the potential technology provider reputable and reliable?

Does the potential technology partner have values and business ethics?

To what extent the technology partner operates in a transparent way?

Is there personal contact and actual human to reach when needed?

Is the technology partner mature and well-staffed to support my business?

Is the technology partner flexible and connectable to your existing solutions?

Most of all, it is important to compare like to like, and understand what you are getting with each offer when looking at compliance costs and making informed decisions about your investment in a system.

What Is The Future Of RegTech?

As financial institutions create new products and services, there is a higher probability that they will also need to create new regulations and incur higher compliance expenses. This will drive the evolution of RegTech. Cost-cutting measures in an increasingly regulated industry have prompted businesses to explore novel approaches to meeting regulatory demands using current technical capabilities.

In the future, RegTech processes will be more widely automated, standardised, and simplified.

While RegTech's first application was in the back office, its capabilities and insights can be expanded to improve the front and back. To effectively manage a company, good corporate governance is essential. Increased confidence from investors and other stakeholders boosts performance overall. Hence, businesses and other organisations should utilise best practices in corporate governance and make it a priority.