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  • Gabriela Paciu

What is Regtech and why is it important for your business ?

Updated: Sep 10, 2018



Regtech (regulatory technology) is becoming very popular as the risk for financial institutions is increasing with the constantly changing regulations. The Regtech is meant to help the Financial institutions to understand and manage the risks they are facing.


Why is Regtech relevant for Wealth Managers ?


The current systems can’t keep up with the requirements that are expected from regulators, as they involve legacy code, are not easily replaced and produce multiple errors.


Moreover, the dynamic regulatory activity and the high compliance costs created the need for the regulatory technology industry. This means using new technology to ease the delivery of regulatory requirements to financial institutions.



Why does your business need Regtech?


  1. Security of the data

  2. Regulatory reporting

  3. Know Your Customer process

  4. Collaboration not competition

  5. Cost reduction

  6. Risk reduction

  7. Fraud revealing

1. Security of the data

The regulations are forcing the financial institutions to comply with

specific data security standards. Regtech startups are saving companies

billions in regulatory fines for non-compliance.


2. Regulatory reporting

The gathering data process is critical for FIs and often is tedious and involves

several errors. Here is where Regtech comes in handy and combines multiple

sources into one dataset, that is up to date and saves time as no manual work

has to be done to check the constantly changing reporting requirements.


3. Know Your Customer process

It is highly important for organizations to check their customers and identify

the unaccepted ones. Manually, this can take plenty of time, which makes

the onboarding and monitoring procedure slow as well. Regtech provides

effective tools and automates all the processes.


4. Collaboration not competition

Regtech companies are not in competition with Financial Institutions, instead

it helps them to function more easily and efficiently. In fact, many institutions are

open to collaborate with Regtech firms to solve the challenges that appear.


5. Cost reduction

Regtech is reducing the costs of compliance processes by simplifying the

procedures and decreasing the involvement of manual work. Besides, with

the enormous fines that can be issued, non-compliance is not an option for

the majority of businesses.


6. Risk reduction

The Regtech companies develop risk and control methods that allow

organizations to analyze regulatory data and identify the issues, as well

as solve them in an efficient way. Moreover, the systems used are very

innovative and prove that the traditional tools can no longer keep pace.


7. Fraud revealing

Regtech provides systems that monitor all the transactions and identifies

any suspicious activity, thus there is a high protection against fraud, coming

it from internal or external sources.


Challenges in the Regtech industry


Every industry has its barriers and Regtech is no exception. With the Regtech

startups appearance being on the rise, Financial Institutions have to be

aware of their expertise.


The main issue is the lack of compliance expertise on integration, meaning

that Regtech companies have high knowledge in technology, but minimal

in compliance. This leads to problems when it comes to providing

consultancy and solving the FIs’ problems.


The lack of expertise of one Regtech company can lead to the FIs’ reluctance

of using another company’s services. Besides, businesses are already slow to

change from outdated systems to innovative technology due to the distrust

in the expertise shown.


It is predicted that the vast majority of Regtech firms will either shutdown or

consolidate because of the high need of resources. This will balance the

market and will allow the best ones to offer their services to the public.


A bright future


Regtech is exposed to a huge growth, as regulations evolve, and the expectations

are growing, promising a higher level of control than ever before. Regulators are

encouraging financial organizations to implement Regtech for streamlining the

reporting and having a better oversight of their data.


The Regtech solutions are fast becoming a standard tool for all financial institutions.


Despite these challenges, Regtech is exposed to a huge growth. If you want to evaluate the regulatory framework inside your company, our experts at B4Finance are here to help you. Find out more about our Regtech solutions here.






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