The 2008 financial crisis acted as a catalyst for the increased emphasis on regulations in the global financial sectors. During the same time, the financial sectors were also greeted with a sudden growth in disruptive use of technology.
The most significant and direct impact of these technology breakthroughs was the emergence of several FinTech companies specializing in technology driven products which would not only enrich the customer experience but also offer a wide range of facilities to financial institutions to better their services and increase their productive outputs. But the increased dependence on consumer data for creation of various technological tools, although a game changer, has also led to major concerns regarding data privacy among regulatory agencies across the world. Need for stringent laws and regulations was glaringly felt and hence the emergence of Regulatory Technology also known as RegTech.
Regtech is a fast growing community of companies which employ automation to solve challenges of the financial world. The global economy, although at a steady rise, is plagued with modern digital challenges such as data breaches, cyber-attacks, money laundering and even terrorist financing.
How RegTech can be useful:
- By providing red flag indicators of online money laundering activities.
- By monitoring online trade transactions and comparing it with available compliance checks.
- By identifying irregularities in the world of digital payments and highlighting the risk avenues.
Observed discrepancies and fraudulent behaviours and further brought to the notice of the financial institution who decide the course of action to be taken for mitigation of potential risk.