By FINTECH Books Contributor, Dhiren Panchal
Increasing levels of regulation and regulatory expectations are having significant operational impacts on firms requiring people, process and technology based solutions. New Compliance can create challenges around understanding, implementing and embedding the new requirements whereas for existing legislation there can be challenges around understanding and managing the risks which makes this even more important to give right treatment.
The global demand for regulatory, compliance and governance software is expected to reach USD 118.7 billion by 2020, whereas the fines have been enormous for non-compliance.
Numerous Regtech companies have come up to address the needs in following segment viz. Compliance and conduct analytics, Fraud prevention (AML, transaction detection and monitoring), Regulatory compliance automation, Risk management reporting and Behavioural assessment electronic screening. Agility, speed, integration and analytics are the hallmark of the new age Regtech firms. More than 100+ known and well-funded firms have mushroomed. UK and US are taking the lead with maximum Regtech firms followed by Ireland and Luxembourg.
So where does it go from here? Most simple and basic is having a central KYC registry to which all institutions have access to. This would make it so much easier to track the money trail of all individuals. Blockchain can help in building secure trade finance transactions and drive risks (and costs also) lower for such transactions.
Central registry of tax records access will help Risk analytics and fraud prevention in a much better way. Firms can work towards integrated risk management solutions can be implemented. Better analytics can lead to improved credit models and help in better credit portfolio management tools.
To sum, Regtech can help to drive down cost of compliance, make platform sustainable and scalable, implement advanced analytics, run integrated risk models and foster growth.