Modern financial institutions are facing a massive influx of data. While this is advantageous for customer and market insights, monitoring cyber-security of this data requires an amount of analysis beyond the capabilities of any single department. Not only is this a human resources issue, it is extremely costly.
Regulation Technologies use cloud computing though SaaS, and they are rising to meet these challenges. RegTech helps businesses comply with data and privacy regulations effectively and cost efficiently, in addition to protecting from fraud and cyber security risks.
The initial rise in compliance technology was a result of the 2008 financial crisis. Numerous data privacy rules and regulations were put into action worldwide to reduce risk and prevent cyber security fraud. You can read about these regulations here.
Companies need tools that can monitor real-time transactions and identify any irregularities in the digital payment database. With compliance technology like RegTech, any irregularities can be immediately relayed to financial institutions, so they can then analyze the transaction and flag it as possibly fraudulent. This early warning system allows financial institutions to identify potential threats in real-time, providing companies with valuable time to minimize risks of data breaches or money fraud.
“In an uncertain macroeconomic and financial environment, applying RegTech could make an important contribution to increasing the profitability and efficiency of financial institutions, while improving their effective compliance with financial regulations.”
– The Institute of International Finance
Trends in RegTech
RegTech as its own industry
- In the upcoming years, RegTech will break out of fintech into its own industry.
- Over $250M was invested into RegTech companies in Canada since 2012. Canadian companies are establishing themselves in the global Reg Tech market by providing leading solutions innovated by international talent for major financial institutions.
- Globally, is it estimated that the RegTech market size is going to grow from 4.3B USD to 12.3B by 2023, a growth rate of 23.5%- applications of AI, Machine Learning and Blockchain being a major contributor to this growth.
RegTech as the essential tool for risk management
- By automating mandatory compliance checks, companies can reduce the time and cost of risk management.
Attracting international investment
- Canada’s ever-growing talent pool will continue to attract international investment, accelerating its credibility as a RegTech leader.
Centralizing and automating RegTech
- Even the most advanced risk and compliance teams struggle if they don’t have the right technology. Centralizing compliance requirements across the enterprise through automating will enhance efficiency enterprise-wide.
- Regulation technology will break out of FinTech to encompass all areas of risk management that businesses need to address. Automating software to determine credit risk, fraud risk, and acquisition risk will help streamline day-to-day operations.
- Technologies used for compliance will continue to develop over time to create flexible solutions that can easily be integrated to a company’s existing business system. Current technologies being innovated for RegTech include AI, Machine Learning, Data Analytics, Robotic Process Automation and many others!
With a rapidly changing financial and economic environment, firms need to be equipped with the proper technologies to handle not just today’s regulations, but the ones that will continue to emerge in the future.
Financial institutions need real-time data analytics tools to process and mine that mass amounts of data they store. Regulation technologies are essential for efficiency and cutting costs associated with the manual processes of regulatory compliance. Redefining your company’s infrastructure with regulation technologies will set up a more promising future.