Why RegTech solutions are vital to a banks’ success


In a time where banks are facing new challenges posed by the ever-evolving digital world, the need to have strong regulatory and compliance measures in place is vital. 

RegTech solutions are becoming ever more critical to banks that are looking not only to ensure stability in today’s world but also those looking to accelerate digital transformation and support growth.

Encompass Corporation recently released a whitepaper which included a Q&A between the company’s North America president Alex Ford and Jo Ann Barefoot, who is the CEO and co-founder of the Alliance for Innovation Regulation.

During this discussion, Ford and Barefoot used their time to share views on the relationship between banks and RegTech providers as well as the impact of RegTech solutions and much more.

In the opinion of Ford, banks are now more open to the adoption of RegTech solutions than they have been in the past. This, she claims, is due to the fact that they have been shown to substantially help in the response to evolving regulations and improving operational efficiency.

Barefoot added, “The relationship is reaching an inflection point, where the ability for banks to work with RegTechs is accelerating. Banks need better tools and RegTechs are fast working to build them.”

As more digitally-native tools in RegTech are emerging, many of these are replacing older analogue tools. Despite headwinds towards adoption, uptake is now accelerating – Encompass remarked.

The company added, “This will be proven out as banks evolve to the point of using suites of RegTech solutions that will be able to improve a bank’s compliance and regulatory performance.”

Where can RegTech solutions most positively impact a bank’s compliance operations in the short-term? Ford believes on this point that RegTechs can provide a ‘significant short-term impact to a bank’s compliance operations’ especially in situations where the incumbent solutions require manual processing.

Barefoot meanwhile explained she believed RegTechs will have the biggest impact in AML. “RegTechs can aid in the KYC work that is required to assess whether to allow a person or entity to have a bank account or financial relationship, with solutions also impacting transaction monitoring.”

Over the longer term, Ford stated that RegTechs are likely to have a deeper, more entrenched impact and be able to move the outcomes of bank compliance efforts closer to the intention of the regulator.

The innovation in the RegTech sector is continuing to expand year-on-year, and its role in banking is no exception. What are some of the innovative technologies being used?

Some of the use cases Ford suggested included those addressing issues such as ESG, consumer data protection, sanctions as well as bringing greater levels of trust and transparency to crypto.

Encompass quipped that RegTechs will be an effective partner in helping financial institutions tackle regulatory changes, such as from keep track of new sanctions on entities as well as meeting updated beneficial ownership requirements.

Barefoot concluded, “We’re moving into a period where supervisory technology will flourish and will increasingly be used by the regulators themselves. Expect to see similar types of tools used by risk evaluation entities, like auditors, as well. While there will be a need to customize these tools to meet unique regulatory needs of the end-user, the underlying technology that can gather and analyze data is the same.”

The full whitepaper can be accessed here.

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