By FINTECH Books Contributor, Patrick Barnert
RegTech was just “born”. It is in its infancy and will evolve fully over the next 20 years. Many are questioning what is new about “RegTech” because the markets for Governance, Risk and Compliance (GRC), Legal Tech, Information Governance and Management and many more adjacent sectors have been established for many years.
RegTech is more than simply software, or a “tech solution”. RegTech will change the entire value chain, from regulators and the political system, to compliance and regulatory advisers, auditors, regulated entities, RegTech service providers, and end customers. Most importantly, RegTech will change the way we all collaborate. There is no alternative!
In 2016, Thomson Reuters counted an average of two-hundred regulatory changes daily, in financial services alone, and forecast rapid growth to come in the future. The volume of regulation measured in pages is staggering. MiFID II alone is 17,000 pages long.
The resources needed to read all relevant regulations, understand their importance, analyze their impact on existing policies and processes, implement changes, and ensure controls, cannot be on-boarded fast enough. Annual costs for compliance in banking alone are estimated at USD 180bn. However, the greatest Risk and Compliance challenges in financial services are the culture changes required, taking into account that conduct risk is the new paradigm for controlling corporate ethics by regulators.
There is no alternative to close collaboration between all parties and even competitors, to overcome regulatory challenges. The future will bring a new way of defining and implementing regulations. The best way forward is to develop central services for functions including KYC, AML, record-keeping and transaction reporting, which can be consumed by all relevant stakeholders.
This will lead to increased transparency, better customer service and reduced cost. All stakeholders will benefit, not least the customer, and society as a whole.