See how forward-thinking finance teams are future-proofing their organizations through AP automation.
What is Regtech?
Regtech is the use of technology to manage regulatory compliance processes within financial institutions. Regulatory Technology comprises emerging tech such as machine learning and blockchain, to ultimately help businesses lower the cost and increase efficiency of complying with regulations.
Top RegTech companies include:
The regtech space is considered a subcategory of fintech (financial technology) with an objective to enhance transparency, bring on consistency, and standardize regulatory processes. The goal is to deliver sound interpretations of confusing regulations that provide higher quality at a lower cost.
The ever-increasing demands of compliance in the financial industry require technologically advanced solutions. Regtech will disrupt the regulatory landscape to deal with complicated compliance issues. It uses information technology and artificial intelligence to enhance regulatory processes.
The financial technology works in the cloud and helps a company comply with regulations effectively and less expensively. Although the main application of regtech is in the financial sector, new technologies are expanding into regulated business, with a particular focus on the Consumer Goods Industry.
To date, regtech has focused on process automation, the digitization of manual reporting, and compliance processes. One example is in the context of “know your customer” (KYC) requirements. It offers formidable cost savings to regulators and the financial services industry.
Regtech has the potential to allow a proportionate and real-time regulatory regime that locates and addresses risk while streamlining regulatory compliance.
How Does RegTech Work?
Regtech involves a community of tech brands that solve the challenges arising from a tech-driven economy via automation. The growth of digital platforms has increased occurrences of:
- Cyber hacks
- Data breaches
- Money laundering
- Non-compliance
- Other fraudulent activities
The rise in financial crime necessitates more cybersecurity. Effective regtech deals with risk and compliance quickly. It takes into consideration national and international regulations like:
- FATF recommendations
- The Patriot Act
- The Bank Secrecy Act
- EU Money Laundering Directives
Regtech uses machine learning and big data to reduce risk in a company’s compliance department. It identifies data on money laundering activities conducted online. This can include activities a compliance team may not be privy to due to the growth of digital marketplaces.
Real-time Monitoring
Regtech tools monitor online transactions that take place in real-time to identify irregularities or issues in the digital payment sphere. Any outlier is sent to the fintech company to analyze if fraudulent activity is taking place. Identifying potential threats to financial security early on can minimize risks and costs associated with data breaches and lost funds.
Regtech companies work with financial institutions by sharing big data with cloud computing. This low-cost technology allows users to collaborate quickly and securely with other organizations.
Digital Transformation
A bank that receives a large amount of data may find it costly, complex, and time-consuming to sort through. In the regtech universe, a firm can combine complex data from a bank with information from previous regulatory failures to predict potential risks.
By creating the right analytics tools a bank needs to successfully comply with a regulatory body, a regtech firm saves a business both time and money. It’s a highly effective tool to comply with the rules established by financial authorities.
Characteristics of RegTech
Regtech is about integration and analytics. The technology helps to quickly separate and organize intertwined and cluttered data sets through extract and transfer load features.
It can be used to quickly integrate a system to get solutions up and running in a short amount of time. Regtech utilizes analytics to mine big data sets for various purposes.
RegTech Applications
Regulatory changes are inevitable. Regtech operates in a variety of financial spheres and regulatory spaces. Projects that this type of technology can automate include:
- Compliance data management
- Fraud prevention
- Employee surveillance
- Audit trail capabilities
A regtech business must collaborate with a specific financial institution or regulatory authority. That’s because each has different goals and strategies that differ from each other.
For example, a regtech that identifies credit card fraud in the digital payments ecosystem may not be interested in employee activity online or the Securities and Exchange Commission (SEC) and insider trading. Therefore, it’s important to choose a company that has developed niche interests.
RegTech Companies
Some example of notable regtech companies and the tools they have created include:
Transaction Monitoring
These platforms boast features like real-time monitoring and auditing. A business can leverage the benefits of a distributed ledger through cryptocurrency and blockchain technology. Two big brands in this space are:
Analyze N Control
Year established: 2002
Number of employees: 11-50
They offer AML risk management, surveillance, and compliance that includes client screening and transaction monitoring. The company also assists with project management through process re-engineering and setup.
IdentityMind Global
Year established: 2011
Number of employees: 51-200
Provides risk management and fraud detection services for digital transactions by tracking payment entities.
Regulatory Reporting
These companies use big data analytics and cloud analysis to enable automated regulatory reporting and data distribution.
Alessa
Year established: 2010
Number of employees: 51-200
This brand offers a variety of features that comply with AML and CTF regulations, which include:
- Transaction monitoring
- Real-time due diligence
- Sanctions screening
- Watchlist filtering
- Regulatory requirements reporting
ScribeStar
Year established: 2010
Number of employees: 11-50
Provides a digital ecosystem for capital markets to allow production and regulatory approval of issuance documents and an online portal. This enables a business to know what to file and when as part of ongoing obligations.
Digital Identity Management and Control
This branch involves AML and anti-fraud detection and screening. It facilitates counterparty due diligence and KYC (Know Your Customer) procedures. This type of regtech also helps with anti-money laundering strategies.
Accuity
Year established: 1836
Number of employees: 200+
This company provides services for compliant transactions, payment efficiency, AML screening, and bank counterparty insight.
Trunomi
Year established: 2014
Number of employees: 11-50
A consent-based data-sharing platform that allows a company to interact with customer data.
PassFort
Year established: 2015
Number of employees: 1-10
This is a customer due diligence (CDD) solution that automates the collection and storage of consumer data.
Compliance
Real-time tracking and analysis of the current state of compliance. It looks at all upcoming regulations to avoid any financial crisis.
6clicks
Year established: 2019
Number of employees: 11-50
This business combines risk assessment, regulation, and risk management into a shared compliance platform.
FundRecs
Year established: 2013
Number of employees: 1-10
A reconciliation platform based in the cloud for the global funds industry. It oversees how all data is managed and processed.
Suade
This company helps banks submit required regulatory reports without any disruption to the architecture.
Year established: 2014
Number of employees: 11-50
In Conclusion
Modern financial regulation requires advanced technology solutions. Regtech is a means for companies to stay ahead of any costly or time-consuming regulations. It helps to drive growth, avoid penalties, and ensure future success.
