FinTech, SupTech, AI, ASI… are a few of the current buzz words in the tech space, however as innovative and very much discussed as they may be, it is RegTech that we should look out for in 2023. The global RegTech market size is expected to reach $22.3 billion by 2027.¹ Understanding what is meant by ‘RegTech’, knowing its market drivers and realisable benefits will help give insight into this rapidly evolving market and why you should become part of it.

What is RegTech?

RegTech is an amalgamation of regulatory and technology and was first coined by the FCA in 2015 as:

“a subset of fintech that focuses on technologies that may facilitate the delivery of regulatory requirements more efficiently and effectively than existing capabilities”. 

Put simply, it refers to technology that assists a firm in adhering to its regulatory requirements. This involves the use of machine learning, cloud computing and automation to name a few, which enables a firm to meet its regulatory requirements in a more efficient, timely and cost-effective manner.

Regulatory Interests

International interest in RegTech has been on the rise for some time; in January 2019 the Global Financial Innovation Network (GFIN) was founded by an international coalition of financial institutions and organisations with the aim of harvesting financial innovation for the benefit of consumers. GFIN seeks to provide a more efficient way for innovative firms to interact with regulators. At the time of writing, GFIN has a network of over 70 organisations worldwide.

In 2017, the FCA worked with the Bank of England and other organisations on the Digital Regulatory Reporting project; an exploration into how technology can improve the way that firms submit regulatory returns.  

The FCA continue their explorations into RegTech with the Regulatory Sandbox and organised forums and webinars looking at how the industry can develop and become more innovative.

Market Drivers

With rapid changes in technology and changes to the working environment (working from home and hybrid working) attention is turning towards compliance to ensure security and processes are not compromised in this new era. 

The handling of data and information is another market driver for RegTech; the sheer volume of data that firms are required to manage and protect often lends itself to leaning on a third-party provider to assist in cultivating good conduct and a compliance culture. Furthermore, the ability to evidence an ethical approach to data via the use of live audit trails, the ability to escalate and report, exchanging sensitive documents and accessing the right data are just a few examples of the advantageous outcomes from using a good RegTech solution.

Costs

RegTech providers, particularly cloud-based platforms offering ‘no code’ SaaS (System as a Service) have been known to have competitive pricing structures which is fast becoming attractive to companies particularly in the current economic environment. Add the burden of ever-changing regulatory landscapes and tighter compliance budgets, firms are looking for an online solution that can help ease the burden for compliance officers and senior managers. Software with customisation, configuration and a fast implementation offering, would enable a firm to quickly establish or enhance their compliance culture and focus on high value tasks.

Growth

Compliance managers frequently complain of the burden of having to obtain fragmented information from multiple systems and having systems that are lacking the versality to grow with the firm, hence the introduction of a new product or regulatory requirement results in yet another system to learn and monitor, and yet more fragmentation.

Scalable solutions and using “RegTech as growth” are essential. You do not want to work in silo from the rest of your business. One of the primary purposes of investing in new technology is to automate manual processes, reducing costs while increasing accuracy. A modular architecture that works with multiple business units and with multiple group entities that can easily scale up with your business is the ideal. You are essentially future proofing your business with this type of investment.

The primary driver of any financial services firm is to meet customer expectations and in doing so remain on the right side of the regulator. Using a RegTech solution helps to mitigate the risks described above and ensure controls remain working at an optimum level whilst freeing up your compliance team to focus on high-value tasks.

Axiol Ltd is an enterprise-wide Governance, Risk and Compliance (GRC) system that provides user friendly compliance functionality in a no-code solution that delivers targeted compliance.

For more information about Axiol please visit www.axiol.com or email info@axiol.com.

https://www.markssattin.co.uk/general/2022-12/why-regtech-is-the-industry-to-watch-in-2023