The world is changing. And changing fast. No sooner has the business world got their heads around ‘Digital’ and ‘Automation’, then comes ‘FinTech’, ‘RegTech’, ‘SupTech’, and before people have drawn breath from reciting the ever-growing list of new tech acronyms - things have already moved on.
So, what are the clear considerations for new technology, specifically RegTech, that businesses should be thinking about now that will bring added benefits and efficiencies to their business? After all, that is the common thread that has led to the emergence of these technologies in the first place.
Technology – the elephant in the room
There was a time when technology was deemed oppressive and limited. It was considered expensive, top-down and would break. Now is the time to change that narrative, and with good reason. Technology, and those who build and use it, has changed significantly, leading to solutions that are increasingly empowering, people centred, affordable, scalable and above all, effective.
Without using the dreaded ‘C’ word, the events of 2020 have undoubtedly tested the resilience and strategic approach of firms like never before amidst a backdrop of continuing regulatory change, increasing personal accountability and pressure to meet tight timelines alongside growing demand from regulators and customers.
With such an outlook, firms have been forced to ramp up their resources devoted to assisting compliance teams with regulatory reporting or find software or service-based solutions to solve this growing demand; and quick.
Key considerations for RegTech
As with any piece of new technology, the process of discovering, researching, choosing and implementing a solution like RegTech is no task for the faint hearted. Even though it is widely known across the industry that the benefits far outweigh the costs, it wouldn’t hurt to have a guiding hand. The most effective RegTech solution will provide a clear roadmap for implementation and set out how a business can achieve successful client onboarding and monitoring, keeping it on the right side of regulation and meeting the risk appetite of the business. A KPMG report on RegTech 3.0 (2018) noted three categories in which financial services businesses can be broadly considered as falling into when it comes to investing in RegTech:
In warfare, you can’t win on the defensive. You can buy time or protect vital ground. But to win, you have to go on the offensive. It’s the same in RegTech, where seizing and maintaining the initiative is critical to succeed.
Consider RegTech as a weapon towards fighting off the negative consequences of not managing regulatory risk effectively and making sure your defences are robust to withstand the constant and evolving challenge of regulation. Given its advanced and automated screening capabilities of regulatory frameworks globally, RegTech can minimise the potential for regulatory actions and fines against companies which are levied for insufficient or ineffective compliance and reporting failures. Consider it the bridge between reactive supervision of financial activities and proactive and preventative real-time monitoring.
RegTech can also ensure operational efficiencies from the automation of manual processes, some of which are lengthy in process and time - therefore freeing the compliance team up to do more enhanced due diligence. RegTech isn’t a replacement tool for a robust compliance function, nor is it developed in separation of the regulators. When delivered properly, it is an exercise of close collaboration alongside regulators to establish new compliance foundations and providing easier ways for companies to keep up with rapidly changing legislation and ongoing client monitoring requirements.
We think of progressive businesses as those which do things in opposition to the more traditional ways of doing business and being disruptive in one way or another. RegTech is just that - disruptive. It goes against the grain of how businesses have run their compliance model for as long as we can remember. In order to reap the benefits that RegTech has to offer, businesses have to take the leap of faith and become a disruptor by embracing digitisation and innovation to change how their compliance function looks and functions. To quote, “A journey of a thousand miles begins with a simple step.”
RegTech isn’t just a fad that businesses adopt to tick a box or to make them or their investors feel as if they are moving forward towards a more progressive future - it solves real problems. Customer expectations for the highest levels of service continue to rise, and quality of service delivered to a customer has the ability to make or break a business. Customers demand quick turnarounds, consistency and minimal effort. People will gravitate to points of least resistance – wherever their needs for speed, convenience, and security are met. It is therefore imperative that businesses today provide the best possible user experience for customer onboarding for example, or risk the very real threat of customer abandonment.
RegTech enables businesses to considerably reduce the amount of times they have to request client information during the onboarding process and allows for a consistent and seamless approach to gathering complete information. This leads to higher quality verification and considerable administrative time being saved, ultimately providing additional resources to compliance and onboarding teams.
It’s hard to believe that something like RegTech could reinvent your entire business and allow you to take advantage of new regions or new sectors seamlessly. But it could. As KPMG also noted in their report, by direct improvements and freeing resources - RegTech has the potential to drive new products and services. By having RegTech in place, companies will have innovation and commercial culture embedded, enabling greater confidence, technical support and resource to guide human decisions and bravely enter new markets or jurisdictions; thrusting a company into a new way of working and changing the pace and security of the entire organisation.
There is no denying that RegTech can seem overwhelming. But the choice of whether to adopt it may not be yours to take for much longer. The sweet spot for businesses will be those who partner with genuine specialists in their field who understand the regulatory framework and strategic outlook for where technology, and the organisation, is heading in the longer term and support you hand in hand from adoption, to development and beyond. RegTech is not stagnant and has the ability to grow with your business and positively transform it, you just have to take the first step.
Article first appeared in Connect Magazine Issue 97
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