RegTech has been a famous buzzword in 2016 and the industry – banking and FinTech alike – is looking eagerly at 2017. RegTech is comparatively a new term used in FinTech to describe a set of companies and solutions that address regulatory challenges across industries, including financial services, through innovative technology.
There are more than 6,000 small, medium and large enterprises globally offering governance, risk management and compliance solutions. MetricStream, Nasdaq, Rsam and EMC are among the top players in the GRC technology market when it comes to product offerings. The popular areas for RegTechs in 2016 have been compliance analysis, knowledge and training, KYC, compliance implementation & monitoring and analytics-based reporting – regulatory, transaction and MI.
In spite of the big number of FinTechs – new and old, small and big – regional and global financial institutions are actively working themselves to address their pain points and have a long way to go before they start bringing their compliance cost down. Even the conservative estimate for regulatory compliance spending by large and small banks is upward of $70 billion. And this figure doesn’t include the fines and penalties being paid by FIs for non-compliance.
Risk management and universal utilities to aggregate available data and content for effective compliance management are still the top priorities and will continue to be big revenue opportunities for RegTechs in 2017. The same view emerged from a recent panel discussion for RegTech in Mumbai – a first of its kind – with panelists from global banks, RegTech startups and APAC regulation professionals.
The length and breadth of data available with financial institutions are huge. This data is still not been used to its full capacity for effective and proactive risk management. Analytics-based RegTech solutions will be the key focus area for banks and FinTechs alike in 2017.
IBM’s acquisition of Promontory Financial Group is a trend setter in many ways for 2017. Firstly, the traditional reputation of Promontory experts on being leaders in risk management and regulatory compliance consulting, combined with IBM’s industry expertise will push RegTechs across the globe to improve their depth and breadth of compliance knowledge and work. Secondly, IBM’s cognitive capabilities already being demonstrated by Watson, will be multiplied when Promontory compliance analysis will complement it. This again will give a very healthy push to analytics based FinTechs to move beyond KYC/AML and health check reporting to sophisticated analytics and proactive risk management.
The value chain will mature in 2017. RegTech has been helping to automate the more mundane compliance tasks and reduce operational risks associated with meeting compliance and reporting obligations. In 2017, analytics and AI would lead the way to empower compliance functions to make informed risk choices based on data provided insight and also advise on mitigating and manages those risks.
Henri Arslanian, noted RegTech professional and expert, also strongly believes that 2017 will be the year of RegTech. The year 2016 has been a great one for RegTech and 2017 is stated to be a prosperous one as well.