{"id":4011,"date":"2024-10-07T10:58:31","date_gmt":"2024-10-07T10:58:31","guid":{"rendered":"https:\/\/fintech.global\/globalregtechsummitusa\/?p=4011"},"modified":"2025-10-31T12:33:38","modified_gmt":"2025-10-31T12:33:38","slug":"how-is-regtech-helping-smes-with-their-regulatory-challenges","status":"publish","type":"post","link":"https:\/\/fintech.global\/globalregtechsummitusa\/how-is-regtech-helping-smes-with-their-regulatory-challenges\/","title":{"rendered":"How is RegTech helping SMEs with their regulatory challenges?"},"content":{"rendered":"<p><strong>SMEs are often the lifeblood of an economy, and being able to protect against future challenges \u2013 whether physical or digital \u2013 are always top of mind. In this fight, what role does RegTech play in abating these fears?<\/strong><\/p>\n<p>One of the biggest transformational shifts of recent years has been the wholesale shift to the digital over simply just the bricks-and-mortar. Many companies, particularly in the financial services space, have left behind the physical altogether and opted to be completely digital-native.<\/p>\n<p>Stacey English, director of regulatory intelligence at\u00a0<a href=\"https:\/\/thetalake.com\/\">Theta Lake<\/a>, emphasised a similar point \u2013 stating the SMEs have seen a transformational shift in how they work, particularly experiencing the productivity benefits of using UCC tools. However, many are also facing growing regulatory attention on whether their business comms are being retained and supervised.<\/p>\n<p>\u201cThis year alone, there have been over 50 regulatory enforcements against firms of all sizes for not retaining records and monitoring communications, pushing total fines over the last few years to exceed $4bn,\u201d said English. In tandem with this, regulations are evolving consistently to keep pace with the proliferation of communication modes, which are more complex to capture and supervise than ever before.<\/p>\n<p>English continued, \u201cWe\u2019ve seen ongoing guidance, for example, from FINRA on the need to supervise whiteboards, Q&amp;A and polling and the use of generative AI in customer communications, through to the interpretation of emojis as investment advice by the courts.\u201d<\/p>\n<p>In the view of English, the challenge for many SMEs is that their existing compliance tools \u2013 built for either email or phone calls \u2013 struggle to capture, retain and supervise the integrated, multi-modal communications of modern platforms. Often today, communications will combine text, audio and visual \u2013 this brings significant cross-over challenges for firms.<\/p>\n<p>\u201cWhat\u2019s clear is that the regulatory burden isn\u2019t reducing,\u201d said English. \u201cThe good news is that RegTech solutions are built for today\u2019s modern communication environments. Communications are captured in their native format across chat, video, audio and more so entire conversations can be reviewed with full context and content. Archives are unified so firms no longer have siloed data spread across multiple systems that hinders search, retrieval and supervision of communications.<\/p>\n<p>\u201cWith the exponential growth in the use and capabilities of UCC tools, RegTech solutions help firms ensure they don\u2019t have coverage gaps in records or oversight. Firms that use DCGA tools are much more likely to be future proofed with coverage wherever staff communicate, including digital whiteboards, workstream or project management tools or social networks like LinkedIn. Many small and medium-sized firms are also benefiting from these modern regtech capabilities built directly into the communication tools they use,\u201d English stated.<\/p>\n<p><strong>The rise of regulations<\/strong><\/p>\n<p>A growing challenge in the industry right now in rising compliance costs caused by increasingly stringent regulations \u2013 something which is even hitting the large firms.<\/p>\n<p>According to\u00a0<a href=\"https:\/\/relycomply.com\/\">RelyComply<\/a>, whilst considering the hefty fines dealt to firms found guilty of AML wrongdoing, SMEs do not have the luxury of facing the music by chucking a lot of money the regulator\u2019s way.<\/p>\n<p>\u201cInstead, faced with completing mandatory compliance on shoestring budgets and smaller teams, the modern SME compliance office handles a Swiss army knife of trickier data science-centric jobs,\u201d the firm said.<\/p>\n<p>With this considered, RelyComply believes this is why RegTech is proving to be so invaluable, due to its ability to handle a broad range of business cases, from streamlining an institution\u2019s AML process into a singular interface to automating real-time investigations and verifying data with utmost accuracy and timeliness.<\/p>\n<p>\u201cTraditionally, various products would have been used for singular purposes on the AML reporting trail, splitting the data into separate areas. Instead, RegTech curbs this by combining data and systems into one secure platform, simplifying and smoothing the role of compliance officers,\u201d the company stated.<\/p>\n<p>Many RegTech solutions are able to integrate with existing practices, meaning that SMEs don\u2019t need to exhaust money and spend endless hours overhauling with already works for them, RelyComply stated.<\/p>\n<p>\u201cInvesting in RegTech now can contribute greatly to safeguarding the data of institutions and their customers from financial criminals in the future, too, as they are far more flexible than previous systems. RegTech does much with fewer mechanisms to achieve AML, even though compliance will likely pose an even stronger stranglehold,\u201d the firm commented.<\/p>\n<p>Christodoulous Mouskos, head of operations at\u00a0<a href=\"https:\/\/mapfintech.com\/\">MAP FinTech<\/a>, outlined a similar point \u2013 stating that RegTech is emerging as a powerful tool to help SMEs manage the increasing complex world of regulatory compliance.<\/p>\n<p>\u201cTraditionally, SMEs have struggled to keep up with evolving regulations due to limited resources and expertise. RegTech offers these businesses innovative solutions that simplify compliance processes, reduce costs, and minimise the risk of non-compliance.<\/p>\n<p>\u201cOne of the main challenges SMEs face is the cost of compliance, which can be significant both in terms of financial resources and human capital. RegTech tools help by automating regulatory tasks such as reporting, monitoring, and data reconciliation, allowing businesses to focus on their core activities. RegTech is levelling the playing field by offering affordable, scalable solutions that previously may have been out of reach for smaller firms,\u201d said Mouskos.<\/p>\n<p>Beyond this, Mouskos believes that RegTech solutions offer more than simply just cost savings \u2013 they also provide SMEs with the flexibility to adapt quickly to new regulations.<\/p>\n<p>\u201cAs regulations continue to diverge across jurisdictions, especially in Europe and the UK, SMEs using RegTech can stay compliant without having to overhaul their systems each time a new regulation is introduced,\u201d he exclaimed.<\/p>\n<p>He added, \u201cMoreover, the integration of advanced technologies such as AI for trend analysis and automation of tasks that previously required manual intervention has revolutionized how SMEs approach compliance. Automated reconciliation and real-time monitoring ensure that businesses can not only meet reporting requirements but also quickly address any discrepancies before they become issues.\u201d<\/p>\n<p>Chor Teh, financial crime compliance industry practice lead at\u00a0<a href=\"https:\/\/www.moodys.com\/web\/en\/us\/kyc.html\">Moody\u2019s<\/a>, also offered a remark that SMEs can often find themselves without both the resources and capacity to cope in today\u2019s evolving regulatory environment.<\/p>\n<p>He said, \u201cIn the US for example, the Corporate Transparency Act requires many companies to file beneficial ownership reports to specific data requirements. However, this regulation currently does not apply to companies with more than 20 full-time employees, over $5 million in gross sales, and a physical operating presence in the country.\u201d<\/p>\n<p>Faced with rising complex compliance requirements, Teh stated that RegTech has become essential for smaller companies to manage growing workloads. Raising the Corporate Transparency Act, he claimed that KYB solutions can help SMEs understand who they are doing business with, including beneficial owners. \u201cAutomated verification tools, as well as business ownership identification, and ongoing monitoring capabilities, help detect suspicious activity and alleviate reporting requirements for SMEs,\u201d he remarked.<\/p>\n<p>Likewise, Anna Shute, product manager at Qkvin noted, \u201cSMEs are required to implement protocols to both their products and employees. Keeping track of relevant regulations and updates can be difficult as the number of regulations impacting the company are expansive. From company to product and customer regulations. This includes GDPR protecting Personally Identifiable Information (PII) and multiple employment laws each with numerous updates to individual acts\/regulations as well as following Consumer Duty and industry-specific regulations.<\/p>\n<div>\u201cRegTech allows SMEs to automate time consuming, low decision-making tasks. Instead of needing to manually set a reminder to check for new regulations periodically, updates can automatically feed into a Compliance platform with suggestions of whether it impacts your products and needs to be implemented into your policies\/products. This is especially important for SME\u2019s, as their product offerings grow, so does the number of regulations they must meet.<\/div>\n<div><\/div>\n<div>\u201cPeriodically searching for regulation updates runs the risk of regulations being discovered in an untimely manner, a month or so after publication. Manual regulation updates also leads to reliance on your Compliance teams subscriptions to newsletters and blogs to update them on the new protocol.<\/div>\n<div><\/div>\n<div>\u201cRegTech needs to not only notify SME\u2019s of new regulations but also ensure only relevant updates are brought to their attention. Even with alerts and newsletters, Compliance members can be overwhelmed with multiple irrelevant notifications making checking notifications time consuming and running the risk of glancing over and missing updates.\u201d<\/div>\n<div><\/div>\n<p>As the volume and complexity of such regulations increase, many SMEs are having to do more with the same amount of resources, emphasises Donal Lawlor, head of sales at\u00a0<a href=\"https:\/\/www.viclarity.com\/eu\/\">ViClarity<\/a>.<\/p>\n<p>\u201cThis is especially true for firms that sell into different jurisdictions and are responsible for country-by-country individual requirements. For the SME firm, a regtech tool can lighten the burden felt by automating those workflows that are especially burdensome, namely the collection, collation and reporting of regulatory evidence and assurance. Regtech can track obligations across different businesses and jurisdictions, providing confidence that filings or submissions are not missed.\u201d<\/p>\n<p>This automation and streamlining of administrative tasks, he claims, helps to free the compliance office to focus on higher-value activities, such as the interpretation of regulations and scanning of the regulatory horizon.<\/p>\n<p>Sean Sutton,\u00a0<a href=\"https:\/\/www.taina.tech\/\">Taina Technology<\/a>\u00a0subject matter expert, also believes that an expanding array of complex regulations is leading to a struggle for SMEs to maintain compliance.<\/p>\n<p>He explains, \u201cInternal Subject Matter Experts at these firms tend to support many back, middle, and front office functions and often lack the bandwidth to manually manage growing compliance demands; they face the challenge of ensuring their firm remains compliant, while juggling other advisory tasks. RegTech has become a vital tool in easing the regulatory workload for SMEs.\u201d<\/p>\n<p>Sutton detailed that RegTech solutions \u2013 many of which now leverage AI and machine learning \u2013 provide automated processes that streamline functions such as tax reporting, customer onboarding, and risk assessment.<\/p>\n<p>\u201cThese solutions offer SMEs real-time access to regulatory updates and advanced analytics, allowing them to quickly adapt to changing rules including components to address FATCA and CRS in the tax reporting space. Automated systems enable the seamless handling of large data volumes, ensuring accuracy in reporting while minimizing human errors from manual processing or reviews.<\/p>\n<p>\u201cThis reduces the likelihood of penalties for non-compliance and ensures faster, more efficient processes. By freeing SMEs from repetitive tasks, RegTech tools also enable them to focus on strategic activities, helping smaller firms meet their goals,\u201d Sutton stated.<\/p>\n<p>These solutions are helping to level the playing field, Sutton made clear and are offering small firms the same \u2018cutting-edge\u2019 compliance tools that larger enterprises are able to use.<\/p>\n<p>\u201cThe integration of RegTech allows SMEs to enhance their service offerings, reduce operational costs, and build trust with their firm\u2019s clients through consistent, reliable compliance support. In this way, RegTech empowers SMEs to manage regulatory challenges more effectively while driving efficiency and growth for their firms,\u201d he said.<\/p>\n<p>Likewise, Joseph Ibitola, growth manager at\u00a0<a href=\"https:\/\/www.flagright.com\/\">Flagright<\/a>, stated, \u201cThe regulatory burden on SMEs is no small mountain to climb. With compliance frameworks expanding faster than ever, especially in industries like finance and fintech, many SMEs find themselves overwhelmed. They\u2019re expected to meet the same stringent regulations as the big players but without the same resources or manpower.<\/p>\n<p>\u201cBy automating labour-intensive processes like KYC checks, transaction monitoring, and ongoing risk assessments, SMEs can ensure they meet regulations without breaking their backs (or their budgets). And it\u2019s not a one-size-fits-all model. RegTech solutions are scalable, meaning they can grow alongside the business, making sure that as regulations evolve, the system evolves with them,\u201d<\/p>\n<p>This is something Ibitola refers to as a double-edged sword. On one side, compliance is being handled effectively, freeing up valuable time. On the other side, it is giving SMEs the confidence to expand, knowing they won\u2019t stumble over regulatory pitfalls along the way.<\/p>\n<p>\u201cThis shift allows SMEs to focus on what they do best\u2014innovating and growing\u2014rather than drowning in paperwork. At Flagright, we\u2019ve seen how RegTech transforms compliance from a checkbox into a strategic advantage, giving smaller players a fighting chance in an increasingly regulated world,\u201d he finished.<\/p>\n<p>One of the key appeals for many in the financial industry is that RegTech helps SMEs address their regulatory challenges with scalable and cost-effective solutions. SMEs often lack the deeper resources for large compliance teams.<\/p>\n<p><a href=\"https:\/\/www.kycportal.com\/\">KYC Portal<\/a>\u00a0\u2013 a company that offers RegTech solutions that help firms automate their compliance processes \u2013 are part of this market. The firm explained that as SMEs grow, their regulatory requirements can become more complex. RegTech solutions are scalable, allowing businesses to expand their operations while still managing compliance efficiently.<\/p>\n<p>\u201cThis ensures that compliance processes can adapt to the business\u2019s growth without becoming overly burdensome. Most RegTech solutions come with audit trails and documentation features that make it easier for SMEs to prepare for regulatory audits. Having clear, accessible records helps businesses demonstrate compliance and avoid issues during an inspection.<\/p>\n<p>\u201cBy automating tasks, reducing costs, and providing real-time insights, RegTech solutions enable SMEs to focus on growth while meeting regulatory requirements more efficiently,\u201d said KYC Portal.<\/p>\n<p><strong>The profit margin<\/strong><\/p>\n<p>A huge \u2013 if not defining \u2013 aspect of being a small business is the profit margin. The bread-and-butter of any company, a healthy or unhealthy profit margin is make-or-break for a business.<\/p>\n<p>Colin Watts, product manager at\u00a0<a href=\"https:\/\/wordwatch.io\/\">Wordwatch<\/a>, said, \u201cA key consideration when discussing regulatory technology for small and medium-sized financial firms is profit margin. In these firms, every cost is passed directly to the customer, who can easily switch to competitors if fees become too high.\u201d<\/p>\n<p>He stated limited operating capital creates two key challenges as regulatory burdens increase. First of all, the access to technology is often expensive, and allocating human resources can strain a small businesses capacity<\/p>\n<p>\u201cMany firms lack dedicated compliance teams, and roles like CCO may be combined with CEO or COO duties. Outsourcing is possible but usually too costly for smaller firms. At the same time, regulations are constantly changing, both domestically and internationally. This makes maintaining compliance a time-consuming challenge for small firms,\u201d said Watts.<\/p>\n<p>While RegTech has grown in use over the last three years, Watts stated, it has mainly been adopted by medium to large firms due to the high costs. Many SMEs can\u2019t afford reliable technology that significantly improves on their existing manual processes, he said.<\/p>\n<p>Watts concluded, \u2018To encourage more SMEs to adopt RegTech, we need to address existing and emerging compliance gaps while controlling compliance costs. In the small financial firm market, where speed and innovation are critical, a one-size-fits-all approach won\u2019t work. Firms need the flexibility to manage their risks and make informed decisions that benefit both customers and the broader market.<\/p>\n<p><strong>The importance of AI<\/strong><\/p>\n<p>Any discussion currently surrounding technology often doesn\u2019t seem complete without raising the spectre of AI. According to Vall Herard, CEO of\u00a0<a href=\"https:\/\/saifr.ai\/\">Saifr<\/a>, particularly in the financial services sector, AI can help firms more efficiently and effectively meet their regulatory requirements.<\/p>\n<p>But in contrast to large firms, he states, smaller and medium-sized firms are far less likely to have the budget or data to create their own, custom AI models. So, these firms depend on RegTech vendors to supply robust AI tools to help solve their compliance challenges. There are a variety of RegTechs that can help with different parts of the regulatory compliance process.<\/p>\n<p>He explained, \u201cSome RegTechs offer AI that helps firms stay abreast of new regulations as they are passed, summarize the impacts to the firm, and even identify gaps. Others help firms as they create public content to make sure it complies with all applicable regulatory rules. Specially designed large language models (a type of AI) can help firms with regulatory report filing.<\/p>\n<p>\u201cThere are also AI applications that help with parts of the compliance process that have grown beyond human-only capabilities due to the sheer volume of data. RegTechs have designed sophisticated AI models that enable 24\/7, international screening of adverse media and sanctions for AML\/KYC efforts. Another application of AI is for monitoring internal electronic communications at scale. AI is also invaluable for real-time risk analysis and detection within large data sets of securities, investments, and transactions.\u201d<\/p>\n<p><strong>Operational flexibility<\/strong><\/p>\n<p>Beyond the other benefits aforementioned, Michael Thirer, legal director at\u00a0<a href=\"https:\/\/muinmos.com\/\">Muinmos<\/a>, raised operational flexibility as another key benefit of RegTech for SMEs.<\/p>\n<p>He said, \u201cRegTech solutions are perfect for SMEs. They give SMEs the capabilities of larger enterprises while allowing them to maintain operational flexibility. During COVID, for example, may investment firms saw a sharp increase in client influx. Those who had RegTech solutions which automated the onboarding process were able to easily scale-up their onboarding without the need for big operational changes. Those who did not \u2013 struggled to respond in time to the change.\u201d<\/p>\n<p>He added that RegTechs can also offer SMES expertise in specialised fields \u2013 allowing them to rely on know-how that goes into the solution instead of trying to develop this know-how internally. This allows them to better focus on their core mission and competencies.<\/p>\n<p><strong>Tackling silos<\/strong><\/p>\n<p>According to RegTech firm\u00a0<a href=\"https:\/\/www.ascentregtech.com\/\">Ascent<\/a>, many of the firms it talks to find that regulatory information exists in silos \u2013 organised by specific teams with specific uses. This, it claims, has developed over years of solving information challenges tactically, without a more strategic approach to information gathering and sharing.<\/p>\n<p>What does a siloed approach cause? It can often, in the view of Ascent, lead to multiple sources of information, which makes data governance difficult, it also provides information gaps that cause risk and impact control creation. There is also a difficulty in efficiently collaborating across teams and business units.<\/p>\n<p>RegTech, in this regard, can help to drive enterprise efficiency, reduce risk and reduce multiple sources of information and analysis that contribute to information inconsistency, gaps and delays and suboptimal decision making.<\/p>\n<p>The firm added that RegTech can provide holistic information governance, communication effectiveness and optimisation of administrative and pattern-driven tasks \u2013 which frees up time to focus on analysis and strategy.<\/p>\n<p>Ascent said, \u201cThe scope of topics for a compliance officer within an SME is increasing.\u00a0 They are not necessarily experts in all areas. RegTech allows them to easily collate and track these trends without needing to be an expert in them.\u201d<\/p>\n<p>Like all firms implementing AI, smaller and medium-sized firms will need to develop robust AI governance frameworks, ensure proper staff training, and maintain human oversight and accountability to gain the full benefits from this technology.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>SMEs are often the lifeblood of an economy, and being able to protect against future challenges \u2013 whether physical or digital \u2013 are always top of mind. In this fight, what role does RegTech play in abating these fears? 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