The Prominent Types of RegTech Solution

CIO Review APAC | Tuesday, August 02, 2022

The types of regtech solutions assist financial service companies to regulate organisations like the Securities and Exchange Commission and the Financial Industry Regulatory Authority.

FREMONT, CA: Regtech was created to assist financial services companies in adhering to compliance requirements established by regulatory organisations, like the securities and exchange commission and financial industry regulatory authority. Typically, the phrase is used as a subset of fintech, which is the general word for any form of technology employed in the financial services sector. For financial institutions, complying with Know Your Customer and anti-money laundering rules is a difficult and costly undertaking. Governance, risk, and compliance of which KYC and AML are a significant portion of a bank’s operational cost, accounting for nearly 15 and 20 per cent.

Types of RegTech

Regtech solutions' ultimate objective is to reduce the expense of maintaining regulatory compliance, which entails automating as many of the associated activities as is practical. Within the realm of regtech solutions, there are a few subcategories, such as the following:

Risk Management

Regtech with a risk-focused approach reveals process weaknesses and potential regulatory problems. These solutions are essential for companies that want to stop potentially dangerous behaviour before it has a negative effect.

Transaction Monitoring and Reporting

These AML solutions track transactions and use AI to identify potentially harmful or non-compliant transactions. This form of regtech is broadly applicable to these solutions.

Customer Identification and AML/KYC

The identification of customers is crucial for ensuring compliance. Rules about KYC and AML have influenced the regtech sector, inspiring the development of solutions that specifically meet these laws.

Regulatory Intelligence

Companies can use regulatory intelligence to stay up to date on all relevant and newest regulatory developments.. Maintaining compliance requires personnel and software to be flexible because rules and regulations are continuously changing.

Importance of Regtech

Financial services organisations, which spend billions annually on compliance personnel and software, recognise the critical importance of regtech. Regtech software can increase a compliance department's efficiency, which can result in greater cost savings for the business. Regtech that works well can help businesses. Regtech investment has grown significantly and steadily over the past few years, which speaks to the importance of the industry and its potential for expansion. Investments in the regtech sector totalled USD 2.5 billion in the first half of 2018, accounting for 87.2 per cent of the total raised by the sector in 2015, 2016, and 2017. The sharp increase in investment is a direct reaction to the significant fines for noncompliance imposed on financial services organisations since 2008, totalling USD 321 billion. Companies are seeking methods to reduce expenses while staying on top of the constantly changing regulatory landscape as their yearly compliance spending has climbed to USD 270 billion. The future is in regtech, and financial services organisations must embrace it.

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