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by GK Strategy 21st November, 2016
3 min read

Driving technological compliance in Financial Services

Since the crash of 2008, resulting in the dearth of lending and the explosion in FinTech firms over the last few years, it was inevitable that regulators would fall behind and fail to keep up with the changes beginning to chip away at the established financial players.

What was made plain was that current compliance management was not agile enough. So, hot on the heels of FinTech, came Regtech, a technological development which will change the way that alternative finance firms meet their compliance requirements, with both short and long term benefits. The real objective of Regtech is to drive down costs and disrupt the conventional regulatory compliance offering, normally provided in-house.

In the short term, adoption of RegTech technologies will cut the cost of compliance for financial services firms; simplifying the compliance process and moving away from costly human led compliance requirements, as most Regtech solutions are offered ‘in the cloud’. The key really is in the name, ‘tech’. Regtech will allow fast growth finance firms a scalable compliance and risk management tool which is flexible enough to follow the trailblazing developments in FinTech. By linking RegTech solutions and regulatory governance, it will allow control and risk frameworks between firms and regulators to be linked seamlessly.

Specifically, Regtech will have practical uses in fields which are critical to financial services firms, which have traditionally slowed down the cost of transaction. Areas such as anti-money laundering, fraud detection and transaction monitoring are data hungry fields ripe for technological innovation. Many are predicting that future RegTech platforms will even be used to interpret regulations, including upcoming changes and have the technological capability to alter a firm’s compliance procedure, responding to a changing regulatory requirement landscape.

Before dipping into the Regtech sphere, firms should comprehensively evaluate their current compliance risks and requirements, and form a clear picture of the existing and upcoming regulations that could impact their financial services business. Firms should be prepared to conduct in depth pilot schemes of their Regtech procedures and communicate this with all stakeholders, including the regulator of any current tests in which the customer may be affected. The FCA have made it clear, that they are excited by these developments and want to assist in any way they can. Let’s hope their rhetoric converts to action in line with the rate of innovation.

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