The financial crisis in 2008 urged the financial institutions to understand more about the technology and the risk involved within the industry. Companies with expert financial technology took a bump up in the industry by proving well versed with different types of technology, which would help the Financial Institution to reduce risk and ease the work. Mid of 2018 showed a downfall in the use of Regulation Technology (RegTech), compliance technology and focused more on the automation of the RegTech and the application within the industry.
Regulatory Management, Reporting, and Compliance being the primary focus in the financial institution constituted towards making it mandatory to use the RegTech in the industry to enhance themselves. It is pertinent to mention that utilizing technology to enhance, automate the regulatory process is called the “RegTech.” It can also be stated as the tools that enable the firms to intensify their compliance capabilities to become a more cost-effective and efficient way.
Compliance is the blood, and Risk Management is the heart of the RegTech. The expense occurred in interpreting the data, complying with the result, analyzing the pitfall would be comparatively high in a financial institution. The regulators focus on understanding how to focus on technology to regulate the financial sector, resulting in a raise of the RegTech. Experts also state that due to the high volume of techniques used within the Financial Services industry, it would ease the usage of RegTech more effectively with a better result. RegTech helps organizations to solve the industry needs more effectively and stay up to date on the regulatory changes, reducing the human errors, and increase the governance process by providing cybersecurity and risk management solutions is the primary focus as a technology.
The RegTech focus on the different arena of technologies to help the regulatory process:
- Data Analytics and Visualization
- Robotics Process Automation
- Compliance with Block Chain
- Regulatory Reporting
- Artificial Intelligence
The datasets are extracted through Extract Transfer Load Technologies (ELT technologies) and help to configure and generate the reports in a short time frame. Big Data and the analysis plays a significant role to analyze and give suggestion with the possible outcomes and how the organization can regulate the same.
Besides the advantages of RegTech, there is always a downside of the technology as well:
- It is not the solution for all the compliance and governance issues within an organization
- The high cost backs the Regulatory implementation
- It would be difficult to rely on the third-party focusing on RegTech as they may not have dealt with similar risk in their experience
- Return on investment would not be the same with all organization, and it would be difficult to predict in the initial stage.
To conclude the Regulatory Technology (RegTech) has a significant role to play in the industrial technology era with improvements in the technology as well as better understanding with the usage of the same. The technology should be much tailored expertly with a guaranteeing point such as reduce risk, ease the process, cost-effective, and better return on investment.