Financial institutions (FIs) face a variety of difficulties in managing risks, including frequent additions of financial regulations by governments, circulars, and modifications of existing regulations, high overhead costs for production and deployment of solutions to comply with the regulation, a high levitation of penalties for non-compliance with the regulation, limitations of legacy systems, and insufficient automation and digitisation to keep up with regulatory changes.
RegTech gives financial institutions (FIs) the capacity to administer policies and procedures effectively, analyse compliance, and provide internal control and accountability for risk data to comply with regulatory standards.
It aids in reducing the time required for client onboarding, identifying fraudsters, hastening the adoption of new rules, and increasing data collection and analytics.
In recent years, data growth has been exponential. It requires a lot of computational power to save and analyse and comply with many rules and regulations from regulating authorities.
Banks must keep, access, and process data on a scale never anticipated to meet regulators’ expectations according to the new laws. Data-driven RegTech solutions will increase regulatory filings’ effectiveness, openness, and value for everyone who creates, gathers, and uses them.
It has the potential to fundamentally alter the compliance process and support financial institutions’ need for real-time data analysis. RegTechs may analyse in a variety of ways, including scenario analysis, regulatory ecosystem analysis, and real-time user engagement analysis globally, thanks to advanced data analytics.
RegTech has advantages for both businesses and regulators. For the financial industry, it can enable financial institutions to manage costs and risks better, free up extra regulatory capital, and open up new opportunities for FinTech start-ups, consultancy firms, and software companies. For regulators, it enables the creation of systems for continuous monitoring to spot issues as they arise and shorten the duration of compliance violation investigations.