Past, Present and Future: The Evolution of RegTech and What’s Next

June 25, 2020 11:14 am Published by
Consumer tech has made our lives more convenient, helps us stay on track with our goals and even saves on some purchases. Similarly, digital innovations make business tasks more manageable and cost-efficient. Regulatory technology, RegTech for short, facilitates compliance with government rules, reduces risk of fines and, quite simply, makes professionals’ work less stressful.

Risk and compliance teams must adapt to an environment of constant change. A new regulatory alert is issued every seven minutes. At the same time, many fines for non-compliance have become more severe. No surprise, then, that an emphasis on RegTech is on the rise to keep pace and in bounds.

RegTech took center stage in the realm of regulation and compliance after the 2008 financial crisis. In its wake, the Dodd-Frank Reform Act was passed. The law placed strict regulations on lenders and banks, with the aim of protecting consumers and stemming the root causes of a preventable economic recession. Several agencies were created to oversee and implement the new rules.

Since Dodd-Frank’s passage, banks have been fined $243 billion for infractions. Today, there are around 300 million pages of regulations and growing — with fines for non-compliance likely to increase.

As financial technology, or FinTech, continues to challenge 20th century conventions, experts believe there are several ways artificial intelligence (AI) could bolster RegTech effectiveness. These include areas like stress testing for financial forecast models, automated monitoring of regulatory changes, and machine learning for applications such as email filtering. It could expand access to services as well.

“We expect to see RegTech having a real impact on improving financial inclusion in the coming years,” says Stephen Ball, vice president of sales and marketing at ComplyAdvantage. “RegTech can help tailor approaches to different segments and reduce costs.”

As FinTech continues to reshape the financial landscape, RegTech will be squarely at the center of the triad between consumers, public institutions and private sector.

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