Regtech

The growing innovations in the financial industry have given birth to Fintech or Financial Technology. Fintech focuses on providing customer-centric, value-added services by leveraging disruptive technologies. Cutting-edge techs including AI, machine learning, and blockchain have enabled digital transformation and automation in the finance sector. 

We witnessed a rapid digital growth of the fintech sector in the milieu of the Covid-19 pandemic. While remaining focused on establishing financial inclusion and automation, did the fintech firms care enough about having the right compliance technology in place? A study by the Cambridge Centre for Alternative Finance (CCAF) and the World Bank revealed that 37% of surveyed regulators have taken at least one regulatory initiative targeting Fintech sectors and 33% of their respondents had accelerated a Regtech/Suptech initiative. 

The Need for Regtech and its Impacts

The new and stringent financial regulations are stacking up the sector. The rapid adoption of technology has also led to the increased demand for better regulatory frameworks and compliance strategies. By solving these burdening regulatory and compliance issues using technology, regtech is becoming a necessity for delivering better and risk-free financial solutions. 

The fintech sector faced a heightened risk of money laundering, cybercrimes, and other frauds during the pandemic. In such scenarios, regtech can deal with compliance failures, risk mitigation, and ease the burden of regulatory obligations. 

A report by Grand View Research found that the global regtech market size is expected to reach USD 55.28 billion by 2025, growing at a CAGR of 52.8% over the forecast period. According to the report, rising fraudulent cases and the growing demand for risk and compliance management are the primary driving forces behind the growth of regtech. 

Apart from the rising necessity, regtech also has its benefits, which fuels the adoption. 

  • Adopting regtech will increase the operational efficiency of regulatory compliance in fintech firms. Modern technology will make the compliance process time-efficient and cost-efficient. Automating compliance will reduce costs and simplify the painful process. Thus, it can adapt to new regulations without any delay. 
  • Effective risk detection and management is another benefit of embracing regtech. The potential risks in the financial sector are on a surge and regtech can help tackle them with ease and pace. Risks like money laundering, investment frauds, etc., can be dealt with warnings and cybersecurity resilience will improve once the entry of regtech solutions. 
  • Real-time compliance and regulatory reporting make regtech a great innovation. Regulatory filings can become transparent and stressless with the adoption of regtech. 

Forter, Hummingbird, IdentityMind, Mind Bridge, and many more startups and companies are focusing on developing the best regtech solutions that can be depended on. 

Regtech innovations like a regulatory sandbox and Regtech as a Service (RaaS) are improving compliance efficiency and introducing new tech-based regulatory frameworks. It works towards achieving accuracy in financial data management by reducing errors and human intervention. With better identity verification, regtech can ensure regulatory requirements for processes like Know Your Customer (KYC) in financial institutions. 

By promising a variety of benefits, regtech is the new go-to strategy for fintech to remain compliant to changing regulatory frameworks with better data monitoring.