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How Regtech Can Be Beneficial For Financial Services
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How Regtech Can Be Beneficial For Financial Services

By Rajarshi November 28, 2022 - 52 views

The Regtech solutions trend has caught on throughout the financial services sector and how! Here’s understanding this phenomenon and what it can do for any financial institution. 

What Is Regtech And Why Is It Important? 

What is Regtech? If you dig deeper, then you will find how companies are not just emphasizing consumer-facing operational aspects, but also back-end elements.

With regulatory pressures on governance and data compliance, Regtech is steadily building a strong use case for itself. More fintech and financial institution partnerships could happen in the near future for leveraging the same. 

Regtech compliance tools are the need of the hour for most financial institutions. Regulatory technology has built a firm base in the fintech space for overcoming several hurdles including litigation, regulations, regulatory remediation, and more.

A majority of Regtech tools make use of SaaS and open APIs for helping financial institutions solve a multitude of issues, helping manage governance and compliance, while lowering regulatory risks at the same time. 

Challenges Faced By Financial Institutions

Before venturing into Regtech requirements and other Regtech certification needs at an implementation-level, challenges faced by several financial institutions should be addressed. They face problems like the following: 

  • Issues in risk management. 
  • Consistent addition of new Government regulations. 
  • Modifications and circulars related to existing rules/regulations. 
  • Higher overheads for solution production and deployment with regard to compliance. 
  • Higher penalties for non-compliance. 
  • Legacy system issues and insufficient levels of digitization or automation for tackling these aspects. 
  • Incompatibility or integration issues of systems. 

This is where Regtech comes into play as a viable solution for the future. 

Advantages – How Regtech Is Helping FIs To Manage Risks

Regtech solutions are ensuring the following benefits for financial institutions: 

  • Internal accountability and control for compliance assessments, risk-based data, effective policies, analysis, and management of procedures. 
  • Compliance with regulations- Financial institutions can easily adhere to regulatory needs in a more efficient manner. They cover periodic regulations while ensuring solutions for the same. 
  • Lowering the time required for onboarding customers. 
  • Better fraud identification and adjusting swiftly to newer regulations. 
  • Enhancing data analytics and collection. 
  • Simplification of data management, complying with safety and privacy regulations. 
  • Ensuring suitable access, storage, and processing of data for financial institutions. 
  • More transparent and effective regulatory filings. 
  • Reporting in real-time along with improving decision-making. 
  • New governance implementation and reframing regulations. 
  • Enhanced risk and fraud management- Solutions for risk management ensure automated assessment of credit for understanding optimal limits and also exposure aspects. Collaboration with Regtech solutions will help in generating higher savings on costs and also higher investment returns, in addition to taking care of compliance and regulatory requirements. 
  • Support for risk-data aggregation, taking care of reporting liquidity, data modeling, analyzing scenarios, and stress test forecasting. 
  • Real-time ML/AI based prevention of frauds, real-time tracking of compliance, AML screening in real-time, and more for KYC procedures. 
  • Data standardization with cloud computing, predictive analytics, governance at the board level, provenance audit, and end-to-end regulatory reporting via automation. 

These are some segments where Regtech solutions can play a vital role in helping financial institutions shift towards a new era of better governance and regulatory compliance.