RegTech is a group of tech firms that uses automation to address problems brought on by a technology-driven economy. Data breaches, cyberattacks, money laundering, and other fraudulent activities have grown due to the development in digital goods.
RegTech lowers the risk to a company’s compliance team by providing information on money laundering operations carried out online—activities that a traditional compliance team may not be aware of due to the growth of underground markets online.
RegTech solutions aim to track online transactions in real-time in order to spot problems or inconsistencies in the world of digital payments. Any anomaly is reported to the financial institution, which will investigate it and decide whether fraud is occurring. Institutions can reduce the risks and expenses related to missing money and data breaches by quickly identifying possible threats to financial security.
Regtech, often known as RegTech, refers to a collection of enterprises that leverage cloud computing technology through software-as-a-service (SaaS) to assist businesses in effectively and affordably complying with regulations. The term “regulatory technology” is often used.
Cloud computing and big data are used by RegTech businesses to communicate information with financial institutions and regulatory organisations. With the help of the low-cost cloud computing technology, customers may safely and swiftly exchange data with other organisations.
Large volumes of data may be too complicated, costly, and time-consuming for a bank to sort through. A RegTech company may forecast possible risk areas that a bank should concentrate on by fusing intricate information from the bank with data from prior regulatory failures. The RegTech company saves the bank time and money by developing the analytical tools required for these institutions to properly comply with the regulatory body. The bank also has a powerful instrument for adhering to the regulations put forth by financial regulators.
History of RegTech
An increase in financial sector regulation was brought about by the financial crisis of 2008. The financial industry saw an increase in the disruptive application of technology as well. The number of fintech businesses that develop technology-driven solutions to improve the consumer experience and interaction with financial institutions has increased as a result of technological advancements.
Concerns from regulatory agencies advocating for stricter rules on data privacy usage and dissemination have arisen as a result of the reliance on customer data for the creation of digital products. The demand for regulatory technology was sparked by the combination of increased legal and regulatory requirements with a more technologically dependent industry.
RegTech firm funding arrangements have slowed as of mid-2018 due to deregulation in the US, as seen by the repeal of Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) regulations, while the cost of compliance should continue to push the trend toward increased automation.
RegTech Services
RegTech covers all facets of risk and compliance management, even though the majority of solutions focus on ensuring adherence to KYC (Know Your Customer) and AML standards. These include issues with regulatory compliance, ID verification, transaction monitoring, risk analysis, data management, reporting, and cybersecurity. Let’s examine each of the examples in more detail.
1. ID Verification
The client’s identification is intimately tied to problems with stopping money laundering. FATF recommendations state that gathering and examining a significant quantity of personal data is necessary for the ID verification procedure. Financial institutions must also approach their clients using a risk-based strategy, according to authorities. People who are politically exposed and those from higher-risk nations, for instance, are subject to a more thorough degree of screening and are only allowed a certain amount of transactions. Financial institutions find the entire process to be extremely difficult as a result of all this.
Regulatory technology can improve the accuracy and efficiency of the consumer and vendor screening process. RegTech can also extract information from spoken language and written text thanks to the strength of machine learning and natural language processing. This enables FIs to identify fraud even during phone calls or when verifying the legitimacy of papers.
2. Monitoring
FATF advises Financial Institutions to submit information on suspicious transactions as away. Traditional monitoring techniques, which call for studying only tiny subsets of data, are incapable of detecting 100% compliance. Instead, ML-driven RegTech solutions enable banks to continuously monitor all transactions in real-time and issue precise and fast notifications on questionable activity.
3. Risk Analysis
RegTech solutions are powered by machine learning and have the capacity to analyse enormous data chunks, allowing them to quickly assess various scenarios and predict potential outcomes. This implies effective risk management. Financial institutions will be able to foresee fraudulent activity instead of only hunting for them thanks to data analysis performed by regulatory technology.
4. Capturing, Integrating, and Reporting Data
Financial institutions must continually acquire, retain, and analyse more data for a variety of objectives, from client screening to generating forecasts, as regulatory obligations multiply and get more complicated.
Additionally, from the regulator’s perspective, compliance necessitates numerous submissions since if something isn’t documented, it didn’t happen. RegTech is able to automate the gathering and processing of information, summing it all up in reports that adhere to the regulatory bodies’ norms.
5. Regulatory Intelligence
The constant changing of the law is one of the main difficulties in managing compliance. Considering that regulatory documentation are sometimes lengthy, maintaining compliance takes more time and effort. RegTech systems may track rules, adopt them in a way that is suitable for the specific organisation, visualise results, and even instruct workers on compliance requirements.
Advantages of RegTech
As you can see, each RegTech solution is made to accomplish a certain task. Since compliance and risk management is a complicated process, incorporating different RegTech tools is crucial. Regulatory technology solutions can save any financial institution’s life if used correctly.
Raconteur claims that incorporating RegTech into every facet of compliance management has the following advantages:
- Process automation and streamlining
- Risk mitigation
- Higher transparency
- Enhanced resistance to cyberthreats while saving money
- Detecting fraud efficiently
- Enhanced effectiveness
- Heightened agility
So, now that we have got enough idea about RegTech, let’s have a look on Top 10 Best RegTech Companies In India 2023 –
1. Enforcd
This business is forward-thinking and makes it possible to comply with international regulatory requirements by offering a worldwide enforcement database. These and more features are present in this product.
- Study of patterns.
- Analyse the government’s activities against the corporations.
- Learn from the many errors that businesses have made.
- Avoid compliance errors.
2. FinChat
FinChat produces compliance monitoring software that enables regulated businesses (like banks and financial firms) to record all business-related instant messages sent through employees’ mobile devices. These recordings are then sent to corporate servers for storage, where compliance officers can quickly access the desired data for audit trails, dispute resolution, fraud investigations, and other purposes.
FinChat makes well-known messaging applications audit-compliant for regulated businesses so your firm may continue communicating with customers using their preferred messaging app without running the risk of regulatory fines for failing to record and retain chats and messages.
3. Reg Room
Reg-Room, LLC offers the financial services sector in the US and abroad regulatory information services, monitoring, and consulting. By monitoring more than 1,350 regulatory organisations, Reg-Room can make sure you are prepared, keeping up with, and making plans in advance of regulatory change (and growing). Reg-user-friendly Room’s web interface makes it simple to discover rules and regulations with just one click.
Save time by using a keyword search or a variety of criteria, such as regulator, nation, area, date range, kind of legal entity, financial product, or company function, to discover the regulations you’re looking for. Reg-Room is used by banks, insurance firms, and other financial institutions as a content stream to assist compliance operations today.
4. Amareos
Amareos was developed as a result of the simple realisation that there is far too much information available nowadays. It is difficult to manually review and evaluate all of the information presented on a subject.
However, technology has advanced to the point that it is now feasible to continuously search the internet for information.
Amareos transform the quantity and diversity of the many social media and news feeds into controllable information flows that help people make better judgments.
Amareos has a tonne of features that will simplify your day.
Their heat-maps offer generalised end-of-day analyses of the world’s financial markets. The dashboard interface uses powerful graphical visualisation capabilities to clearly organise all the data you require about an asset, enabling you to immediately see patterns and linkages and make profitable choices in a timely manner.
5. KyoLAB
KyoLAB was established in 2016 with the goal of being your partner in mobile compliance. Their solution enables you to monitor and archive data from well-known mobile messaging services like WhatsApp, WeChat, and Telegram in order to reduce compliance risk. Their real-time analytics provide you useful information about your consumer base as well as transparency for compliance. Regulatory Technologies (RegTech) such as compliance monitoring, compliance messaging, and contextual analytics are KyoLAB’s area of expertise.
- MOBILE MESSAGING COMPLIANCE – Archive the most widely used instant messaging (IM) applications for mobile audit trails and dispute resolution.
- MOBILE DEVICE MANAGEMENT – From a single admin portal, have comprehensive compliance visibility and control across mobile endpoints.
- MOBILE DEVICE SUPPORT – Currently, they provide corporate and Bring Your Own Device support for Android, iOS, and Web clients (BYOD).
6. Cappitech
The demands of regulatory reporting are ever increasing. Cappitech is on a mission to close the compliance gap between enterprises that must abide by the law and the regulator.
To make it simple for you to comply in a thorough, accurate, and timely way, they automate the transaction reporting process into a single compliance platform. No risk of paying large fines. Avoid wasting resources on pointless regulatory reporting. You won’t experience any pain or discomfort when considering regulation. They are also here to help your business benefit from your compliance duty by giving intelligence and useful insights from the compliance data you have already gathered.
They were founded in 2013 and are a major supplier of regulatory reporting, best execution analysis, and business intelligence solutions for the financial services sector, driven by a team of specialists with over 20 years of experience in developing financial technology products. Cappitech was bought by IHS Markit in 2021, and IHS Markit was later acquired by S&P Global in 2022. The greatest reporting solution in the market is offered by their joint company, Global Regulatory Reporting Solutions.
7. DueDil
DueDil digitises and collects data from a variety of sources, enabling users to do information searches, locate new clients, and reduce risk.
The information included in the company search results includes up to 20 years’ worth of financial data, mortgages, investments, warning signs, legal issues, and group ownership arrangements.
Individual director profiles, including complete names, birthdates, nationalities, known aliases, timelines of current and prior directorships, and social media accounts, are included in the director search results.
DueDil features include an alert mechanism that enables users to follow and get updates on businesses that they are interested in, thorough director and company search criteria, financial metrics, news, group graphs, and charts, and social network integration. DueDil introduced the fourth iteration of its API in March 2017 to enable companies to incorporate DueDil data into their own systems. DueDil is a tool that enables users to run simultaneous verification checks on linked companies and people through a partnership with Callcredit Information Group.
8. CityFALCON
How financial news is sourced, curated, shared, and consumed is being redefined by CityFALCON.
CityFALCON Score measures financial tweets, news, and writers similarly to how Klout Score assesses people and their social influence. CityFALCON Score can provide you with the top 30 pertinent stories out of 200K available news on oil.
Based on each person’s profile, interactions, and interests, CityFALCON’s patented algorithm generates a unique newsfeed.
9. Clause Match
Regulated businesses rely on Clausematch as their platform of choice to easily handle policy management and regulatory change, demonstrate compliance, and maintain responsiveness and agility in a constantly shifting environment.
In addition to being included in the RegTech 100, CB Insights’ Top FinTech 250, and Dow Jones’ Top 10 RegTech Companies to Watch, Clausematch was founded in 2012 and has been recognised as a Global FinTech Startup of the Year by FinTech Abu Dhabi.
10. Met Facilities
Through a strategy of diversification, Met Facilities has developed competence in a wide range of financial services operations. Met Facilities is a top supplier of regulatory approvals thanks to their experience, business focus, and attention to detail.
A complete and adaptable regulatory hosting framework for arrangers, advisers, and funds, as well as for young and established companies, fin-tech companies, and financial services companies. Their incubator/accelerator platform enables start-ups to make use of resources that are often only available to major universities. Speed to market is the main focus of their services, which also offers a personalised and thorough service. Their platform for regulated hosting, which is solution-driven, is built on years of expertise and experience.
They offer “plug-in and play” services and facilities and have important alliances with top suppliers, consultants, and prime brokers that are crucial for investors’ comfort and brand recognition.
They may meet your needs in the most effective and legal way possible by combining Appointed Representatives and Controlled Functions/Approved Persons.
You may concentrate on developing client interest, a track record, luring investors, and setting the effective groundwork for your company in weeks as opposed to months.
What Does Banking RegTech Mean?
Banks may utilise RegTech software-as-a-service (SaaS) to help them comply with Securities and Exchange Commission (SEC) or Financial Industry Regulatory Authority (FINRA) regulations, which have grown by 500% since 2008. (FINRA). RegTech can be beneficial in two particular areas: Know-Your-Customer (KYC) regulations and AML compliance duties. RegTech can authenticate clients’ identity and spot probable fraud incidents by using AI and ML.
Need for RegTechs
The financial services sector has traditionally been heavily regulated. In an effort to ease the enormous and steadily increasing burden of these regulatory obligations, financial institutions are starting to turn to cutting-edge technical solutions. In every country in the globe, financial industry policies are evolving quite quickly. In order to deal with the overwhelming number of new regulatory changes, financial institutions must adhere to stringent timelines and complicated standards. Over the past 10 years, regulators have urged financial institutions to modernise their businesses several times, but many of these organisations have struggled to adapt to these regulatory-driven changes.
Regulatory technology (RegTech) laid a solid foundation within the FinTech ecosystem in order to overcome this and develop solutions aimed at new and complex regulations, litigation, and regulatory remediation areas faced by financial institutions (FI), as well as a general reduction in compliance costs. A variety of services and solutions are provided by more than 1600 businesses worldwide to assist other businesses in meeting their compliance obligations.
How RegTech Can Help Your Company Achieve Compliance:
Time spent onboarding new clients is reduced in half, and terrorist organisations and money-laundering threats may be discovered. Since the procedure is now more efficient and quicker thanks to digitalisation, laws are being followed more consistently.
Applications of RegTech could lead to decreased penalties and litigation costs. Financial institutions could reduce the risk of reputational damage associated with data or cybersecurity breaches brought on by poor compliance monitoring by reducing compliance violations.
Financial companies can more swiftly react to new rules thanks to RegTech, which enables them to track regulatory changes in real-time. As a result, enterprise-wide deployment of modifications to internal rules may be accomplished much more quickly than manually.
Data analytics may be enhanced with the use of RegTech tactics. Institutions may create a more thorough picture of their clients’ internal and external financial histories using data analytics.
RegTech speeds up regulatory reporting. Similar to how technology applications boost the effectiveness and speed of onboarding new customers, they similarly boost the effectiveness of reporting suspicious conduct to the police. Because of the employment of cutting-edge technology, financial risks and crimes are identified and reported more rapidly. Once suspect activity and fraud, such money laundering and terrorism funding, are identified, RegTech helps to monitor it. RegTech therefore helps financial institutions with early detection.
Benefits of Hiring RegTech Companies
For sectors with strict regulatory requirements, including banking and financial services, regulatory compliance demands are continuously growing. These sectors may leverage a variety of contemporary technology to address difficulties with regulatory compliance, including artificial intelligence (AI) and machine learning.
Using these technologies, regulatory compliance procedures may be improved in both efficiency and effectiveness. Here are some possible advantages of RegTech products for financial institutions.
Agility: RegTech solutions may assist organisations in organising and decoupling crowded and interrelated data sets, allowing them to fully utilise the data they already have. ETL (Extract, Transfer, Load) technologies are used in this process.
Speed: RegTech systems can swiftly provide reports in addition to monitoring and analysing a significant volume of data. Workflow automation may significantly increase productivity.
Integration: The solution will be put into place quickly and become operational. RegTech solutions can easily work with current solutions thanks to APIs and cloud-based models.
Analytics: RegTech makes the most of massive, existing data sets by using analytics technologies to bring forth their full value. A RegTech solution’s strong analytics can offer practical information and speed up decision-making.
The use of regulatory technology solutions enables the tracking and recording of compliance actions, the identification and prevention of financial and cybercrimes, the centralised filing of regulatory papers, and the simplification of market review operations. As a consequence, compliance departments may boost operational effectiveness, cut costs, mitigate regulatory violations, and boost return on investment.
RegTech Issues and Solutions
Technology for regulatory compliance isn’t simply utilised to handle KYC and AML financial regulation needs more quickly and cheaply. Since 2014, the RegTech sector has experienced significant growth. At present, more than 400 RegTech companies are providing a range of compliance solutions that may help enterprises realise measurable cost savings. RegTech is frequently used in transaction monitoring, identity management, risk management, regulatory reporting, and compliance management.
- Regulatory Compliance – For instance, the complete communications compliance lifecycle is automated and managed by a communications compliance platform. Artificial intelligence-based compliance systems may assist firms in getting rid of important financial compliance-related problems including market misuse, record-keeping, e-commerce monitoring, and thorough investigations.
- Regulatory Reporting – Using big data analytics, real-time reporting, and the cloud, regulatory data delivery may be automated. For example, when regulatory reporting requirements change, banking, brokerage, and insurance organisations may get notifications in real-time so they can continue to be compliant. These kinds of solutions can cut down on the time and money needed to meet regulatory requirements.
- Management of Risk – RegTech solutions use big data and analytics, as well as speech and text recognition, to supplement incoming risk data with regulatory risk analytics and intelligence.
Peer analysis and workflow tools that let monitoring and compliance teams visualise, organise, and prioritise monitoring and compliance tasks enable them to swiftly determine how exposed to regulatory risk a company is. SaaS systems for risk management may streamline and improve the efficiency of regulatory operations.
Conclusion
Finally, it’s important to remind banks and other financial institutions that using RegTech solutions will be the next big step after digitising their risk and compliance management processes. According to our literature assessment, financial institutions are the key places where RegTech is now being considered. Organisations appear to be concentrating their efforts mostly on process control, analysis, and alerting related to the substance of the numerous recommendations that seem to stream in on them at this time.
Researchers use artificial intelligence technology rather than directly applying artificial intelligence to natural language processing. RegTech will eventually be applied to healthcare and other businesses since both control and content warnings are necessary in these fields as well, according to both scientific research and practice.
