With financial institutions’ annual construction costs exceeding hundreds of billions of dollars and the growing number of financial regulations, it is not surprising that reg-tech, or regulatory technology, has emerged to respond to a wide range of compliance issues. In 2020 you need to know about RegTech.
Like all emerging technologies, there are two approaches to adopting rig tech. While some businesses are rushing to embrace innovation, others present reggae tech with skepticism and skepticism. Many businesses do not know much about RegTech and prefer to understand their old strategy to meet the requirements of the control.
If you fall into the bucket later, let me master my fantasy to clear the fog and shape the rag tech. You can understand how RegTech helps deal with all kinds of risks and regulatory challenges, and where RegTech is headed.
What is RegTech?
RegTech means that technology is used to ensure the monitoring, reporting, and compliance of most financial industries (primarily the most regulatory one), while in the pharmaceutical and pharmaceutical, oil, and gas sectors, Transportation requirements should also be met. RegTech aims to monitor financial crimes, focusing on fraud, money laundering, and insider trading.
History of RegTech
The history of rig tech goes back to the 2008 financial crisis, which led to an increase in government regulations. Furthermore, technological advances in the financial domain have led to the emergence of several fantastic solutions aimed at serving consumers differently.
The use of consumer data for these fantastic products has raised concerns among regulators about maintaining data confidentiality. Specifically, the General Data Protection Regulation was introduced to handle how consumer data was collected and managed. Other rules and regulations, such as the direction of payment services and the direction of financial goods in the markets, come in handy for managing the payment and investment sectors accordingly.
RegTech’s Response to Challenges
RegTech responded to these challenges by promising to help banks avoid billions of dollars in fines for non-compliance and to invest more with state-of-the-art RegTech solutions. However, many banks were reluctant to embrace this innovation, relying on their legacy technology and processes, disconnected IT systems, and questionable data.
The 2020 Mess of Uncertainty
In 2020, with a new wave of economic uncertainty and recession, we can expect more regulations to prevent bankruptcies, rising unemployment, and other crises. In all of these 2020 issues, RegTech can help take center stage and adapt to the maturity of RegTech solutions to facilitate compliance, risk management, and regulatory reporting.
Key Benefits of RegTech
In addition to the increasing regulatory burden and high non-compliance penalties, another factor has contributed to the development of rig tech. The benefits of rig tech solutions are substantial and are in line with the growing demand for rig tech. One of the key benefits of digitization is the process:
- Ensure consistent compliance with various regulations due to automatic real-time monitoring and monitoring of changes.
- Low compliance costs (banks’ physical infrastructure costs can exceed 40% of their total IT costs).
- Effective fraud detection, customer identification methods, and anti-money laundering controls.
- Better risk management.
- Effective regulatory reporting.
- Real-time transaction monitoring and auditing.
Still, many financial organizations, regardless of their growing popularity and tangible benefits, avoid adopting RegTech solutions. Let’s explore the reasons in more detail.
Major RegTech Challenges
Among the main obstacles that RegTech companies face are:
Varied Regulations in Different Jurisdictions
Despite the consensus among financial centers on the code of conduct after the 2008 crisis, different laws set different standards. For example, US banks comply with the Dodd Frank Act, while the European Union issued MIFID II for businesses within its jurisdiction.
In addition, the basic provisions of these laws can be interpreted regionally, so regressive providers should take this into account and prioritize their enforcement laws and local characteristics. In this case, they will be able to provide a solution that is effective for different jurisdictions.
Numerous regulations, such as GDPR, MIFID II, and other regulations applicable at the same time, bring potential inter-regulatory disputes that could significantly affect businesses in all industries. Reg-tech companies have significant work to do in resolving issues that help their clients comply with requirements and find issues that could lead to conflict.
Consumer Data Privacy
Being a hot issue, especially in the face of GDPR, the confidentiality of consumer data becomes even more important for any company, and rig taxes are no exception. They must ensure the safe management of user data and protect clients’ information from data breaches, damage and other cyber threats.
The Quality of Data
Reg Techs taxes rely heavily on the quality of the data provided to them. For example, obtaining duplicate, inaccurate, or incomplete data from an insurer may result in a product that lacks accuracy and insightful value.
One Final Note
For every company that wants to innovate, I recommend following a 3-step approach. First of all, it is very important to identify the problems solved with RegTech and analyze the possible solutions in terms of measuring ROI and performance.
Second, it is important to call a dedicated on-site rig tech team, which is responsible for explaining solutions, monitoring their implementation, and evaluating performance. Alternatively, if there is a shortage of RegTech professionals in your local talent market, you may find a third party provider who will make your RegTech project an endeavor, which pays off.
Finally, it is important to review Regtech’s long-term sustainability to ensure that the Regtech you are working with has a viable operating model, strong leadership, stable funding, and any non There are resources available to deal with this issue.