Whether you’re already using RegTech or plan to start doing so this year, it’s crucial to ensure the trends you follow are relevant and up to date. Here are some things to keep in mind.
1: Will become increasingly prominent this year
Analysts believe 2019 will be the year that drastically fuels the continued growth of RegTech based on a few essential factors:
- New and challenging regulatory concerns
- The continual emphasis on cost reduction
- The use of RegTech to assist with non-compliance matters
A report from Deloitte showed there are already a few hundred companies operating in this space. The majority of them offer compliance assistance to clients, and more than 75 companies help with identity management and control. Given the increasing number and diversity of RegTech companies around the world, you should strongly consider determining how your company could take advantage of innovations in the field this year.
If you’re already familiar with some RegTech platforms, consider looking at what else exists. As more companies in this area get established and start offering their products to clients, it’ll become easier to overcome any identified regulatory obstacles by using specialized tech products.
Regulatory technology: a step in the right direction
2. The leading RegTech firms will focus on high-quality data
A 2018 infographic from Raconteur showed regulatory professionals mentioned improving data quality for risk aggregation and reporting as one of the top challenges they face. But, the infographic also included a bar graph that showed more than 60% of RegTech companies have data analysis and artificial intelligence technology working in the background.
Given these two trends, the top RegTech companies will likely focus on data quality as a selling point even more often this year. Representatives from those enterprises know if their clients can’t trust the data from the respective platforms, they likely won’t remain customers for the long term.
If data quality is an ongoing challenge for your company, now is the time to start assessing the RegTech solutions that could help overcome that common obstacle. Also, as you look for new RegTech products and make a shortlist of the ones your company might buy, view high-quality data as a necessity.
3. RegTech will help companies avoid fines, but has a broader impact
The banking sector is primarily responsible for helping bring RegTech to the forefront. That’s because entities in that industry have to follow know-your-customer (KYC) and anti-money-laundering (AML) procedures. To get an idea of how costly the associated fines can be for non-compliance, you only need to consider a 10-year study from Fenergo.
It calculated fines totaling $26 billion for companies that did not comply with AML and KYC regulations. So, RegTech can help companies avoid penalties that would otherwise substantially cut into their bottom lines and likely cause stakeholders to worry.
On a related note, the bottom line does not necessarily only relate to profits. Companies increasingly refer to the so-called triple bottom line, which looks not only at profits, but also at the environmental and social impacts of a company.
Besides enjoying profit-boosting effects, businesses can highlight the associated social and environmental impacts of using RegTech platforms. Those will vary by company, but consider how technology could speed up finance-related approvals and enable that change with less paperwork.
Then, the people who need to submit documents for verification get their applications processed faster, which could give them more access to products or services. Additionally, being able to take care of more regulatory concerns in the digital realm allows companies to have a positive impact on the environment by saving paper.
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4. Failing to invest in RegTech could result in a competitive disadvantage
If your company has thought about moving forward with using RegTech, but hasn’t done so, the hesitancy could be a setback for you. Intertrust surveyed more than 500 executives to find out how they handled their regulatory burdens. The findings showed that 55% increased the size of their compliance teams, and 50% hired tech experts to modernize their operations.
You may also find it surprising that 63% of respondents said they purchased off-the-shelf solutions to help with their regulatory needs. The majority of people who answered the poll think the demand for RegTech offerings will increase within the next two years. That potentially implies it’s best to start working with RegTech products sooner than that to get ahead of the curve.
If your company still does most of its monitoring, compliance and reporting manually or without the help of RegTech, it’s time to at least investigate how your company could get more done and reduce risks with tech assistance.
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5. RegTech fits into the evolution of compliance
Analysts also point out there’s an evolution in what it means to be compliant, and that RegTech aligns with that ongoing shift. For starters, authorities increasingly impose more regulations, which could make compliance more difficult to achieve. But, it’s helpful that regulatory bodies are also more open to accepting the use of RegTech.
The International Compliance Association notes that in addition to companies needing to adhere to external regulations, they must also implement internal practices that help them comply. Part of sufficiently building those internal systems means assessing the risks organizations face and devoting resources to conquer them.
The definition of compliance will certainly continue evolving, but RegTech tools can help companies stay on the cutting edge. As such, it’s a good idea to check to see which of your current regulatory practices need updating, then look for specific RegTech products that can help you make them more relevant to modern needs. The most substantial updates may require more human resources, too, but seeing how tools could assist is a smart way to begin.
Information Brings Empowerment
This list gives an overview of why it’s to your advantage to stay abreast of current regulatory practices and monitoring procedures. Learning about what’s available in the RegTech market can help your company incorporate technology to more easily meet regulatory demands and avoid fines.