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The rise of regtech


by Robert Bush – Fund Administration Manager

Regtech is an idea whose time has come. Understanding and using it will save you time, headaches….and money.

Regtech is a term used to describe the use of technology with respect to regulatory monitoring, reporting and compliance. It relates to any technology created to address regulatory challenges and designed to help companies understand their compliance and regulatory requirements.

It also implements controls to mitigate risk.

Regtech includes supplementing existing risk and compliance work place to fully automate these through to cutting edge technologies like Artificial Intelligence and block chain.

Another defining feature of regtech is that solutions tend to be cloud-based so that data can be remotely maintained,managed and backed up. This leads to lower costs, increased flexibility and control of the well as additional security features including data inscription.

Fintech on the other hand refers to the use of technologies in the financial services industry to improve operational and customer engagement capabilities.

These two terms are often applied to banking and financial services exclusively. Regtech is assumed to be a subset of fintech but… in reality regtech is broader than fintech.

Whilst regtech and fintech are changing the face of banks and financial institutions, regtech is also applicable to many more industries.

Regtech is designed to address the issues of reporting to regulators whilst fintech relates to customer engagement capabilities.

There are three things driving the growth of regtech:

  1. Risk and Compliance. The amount of regulation that financial services, health care and many other industries are responsible for tracking is enormous – and growing every day. As a result, risk management is now a booming industry. In the years following the GFC the easiest way to implement these control functions was to throw more people and increase headcount into the risk and compliance space. Now, due to increased costs and tightening budgets, that is unsustainable. So, instead of throwing people at it, customers are now using regtech to automate those manual workflows
  2. Identity management. Anti Money Laundering (AML) and Know Your Customer (KYC) are key here. AML refers to regulations designed around the practise of moving money through illegal actions, whilst KYC is the process of identifying and verifying your client. Regtech technology can assist with this existing cumbersome process by confirming the person’s identity.
  3. Regulatory reporting. Ongoing reporting is required by the regulators to assess an organisation’s operations and compliance with regulatory provisions. Regtech enables automated reporting to meet your responsibilities. The reports are all customised for the regulator.

Every time there is a financial crisis, a new breach or a company collapse there will be even more regulation and a greater compliance burden.

As a result of the current Royal Commission into the financial services industry there will be additional reporting required from all financial institutions, particularly banks.

At Global Merces we have an online application form that we use (which is straight though) processing our investors applications, but it also goes through an auto mic AML and KYC process to verify those people and confirm they are fit for purpose for investing.

The beauty of the online application form is that we don’t require a wet signature on the form, nor do we require certified documents to be sent to us so it’s a very easy, customer-friendly process.

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