RegTech (short for regulatory technology) is a term for technology solutions which help organisations stay on top of their regulatory and compliance requirements.
Achieving and maintaining regulatory compliance takes up a lot of time and resources, especially if you’re operating in the Financial Services or Government industries which are highly regulated. New technology (RegTech) is being developed to help ease the burden caused by many of these regulatory requirements, to support companies in becoming compliant and maintaining their compliance over the long-term.
Why do we need RegTech?
According to Deloitte businesses have around 200 different regulations to comply with, so tech is being developed to automate some of the more repetitive tasks involved in maintaining regulatory compliance¹.
For example, in the Financial Services industry, a lot of time is dedicated to developing reports and sending them to regulatory authorities; showing details such as customer transactions, bank transactions and general activity. These increased requirements were introduced after the 2008 financial crisis when more provisions were put in place to monitor some of the trading activity that may have contributed to the crash. These regulations state specific requirements for how data and reports are organised and the regularity of reports. This can involve financial businesses having to employ teams of people just to facilitate the running and compilation of reports.
And, as more regulations are introduced, such as the GDPR, businesses will need to dedicate further internal resources to achieving compliance and managing their regulatory commitments. RegTech can help to reduce the time spent in your business on regulatory compliance activities and make it easier to understand what you need to do acrossyour operational activities to achieve compliance.
Using RegTech to solve regulatory challenges
One issue with regulatory reporting is that organisations often have huge datasets that may be overlapping – with reports from one department showing a range of data that may also be included in reports from another department. One struggle for financial institutions is separating out the data to just show ‘one version of the truth’, which can often be a manual process involving different spreadsheets and applications. This leaves it open for errors to occur, and there are numerous examples of incorrect reports because one formula on a 20,000 line report was incorrect.
RegTech aims to automate many of these processes, to not only speed up the activity but also to make it more accurate and less prone to human or manual errors.
Types of RegTech solutions
RegTech solutions are being developed to solve a wide range of regulatory compliance initiatives. Here are a few areas where tools are being developed:
- Regulatory gap analysis
- Business health checks
- Transaction reporting
- Regulatory reporting
- Activity monitoring across staff and customers
- Data management and cleaning
- Tracking data; how it is acquired, how it is shared and how it is stored
- Behavioural analytics to spot anomalies
- Assessing the impact on a business of new regulations being introduced
The aim of RegTech solutions are to help businesses become more compliant, whether that’s by using standalone RegTech solutions or by building add-ons to existing software to build in regulatory checks and processes along the way (i.e. a pop-up asking the customer for consent to share data at regular intervals). And, it’s about helping businesses to maintain their compliance position over time, a task which can be complex and resource-intensive. If you want to find out more about how to achieve and maintain a continuous state of compliance across your IT environment, then take a look at our research report on The State of IT Compliance.
The future of RegTech
RegTech is still a relatively new field and so we are yet to see the full extent of RegTech potential use cases across different industries. In the future, RegTech is expected to move away from handling simple compliance tasks and shift towards harnessing artificial intelligence technologies to make more decisions about complex regulatory situations. Additionally, it’s likely that different industries such as manufacturing and engineering will develop their own sector-specific RegTech solutions to address industry regulations, as well as more general business regulatory requirements such as the GDPR.