Regtech companies primarily work with financial institutions and various regulatory agencies. Through this collaboration, they are able to make use of cloud computing and big data for the transmission of information.
Often times, banks receive huge data and may not always have the luxury of time or possess the required resources to go over it thoroughly – this puts the bank at a risk of overlooking significant red flags of malpractices. With the help of predictive analysis, a company specializing in RegTech can efficiently work on the volume of data, compare it to previous available data of regulatory measures and/or any lapses and be able to predict the potential vulnerable areas putting the bank at risk. This timely assessment can not only help to curb huge losses but also caution the bank against any possible fines or penal actions from regulatory authorities.
Each RegTech company may specialize in one of the many fields that they work in such as compliance data management, employee surveillance, forensic auditing or even fraud prevention and therefore the pairing of a RegTech business is of crucial importance. Collaborating with a financial institution or regulatory authority without adequate research on their expectations and nature of work may turn out to be disastrous.
The world of RegTech can be broadly classified into the following categories:
- Tech-enabled Process Efficiency: it includes Robotic Process Automation (RPA), Intelligent Automation also the self-learning systems.
- Data Sharing and Aggregation: it includes refurbishing old data, automating the data collection process, and applying big data capabilities. Also included are secure networks and application programming interfaces (APIs) that allow financial institutions to share proprietary data.
- Data driven Insights: it includes the application of advanced analytics to voluminous data sets for compliance activities. Intelligent automation and predictive analytics are also a part of it.
- Platforms: it includes real-time databases and Software-as-a-Service cloud systems.
Regtech is expected to leave a positive impact on the global financial sector because of its ability to make compliance more efficient for businesses and entities. The global financial services sector is expected to become more transparent with a greater emphasis on customer experience and public service. Even the regulators are stated to benefit out of RegTech because they will have access to enhanced tools necessary for monitoring the financial systems across the world and help countries become more compliant to global standards.