This article was sourced from Forbes. Article by John Ivanoski.
The financial services industry is focusing on growth again. After eight years of cost cutting, increased regulation and operating in a low interest rate environment, firms are putting renewed emphasis on acquisitions, new product development and improving the customer experience.
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For many financial firms, the best way to do that is to automate much of their regulatory compliance. Regulatory Technology, or RegTech as it’s called, can help foster the industry’s growth while making sure it meets often-complex regulations.
How? Instead of merely analyzing “big data”—the vast amount of information that companies collect about customers, suppliers, sales and markets—RegTech focuses on “smart data.” It does this by using innovations in artificial intelligence, such as robotic process automation (RPA), machine learning and cognitive technologies, to make sense of big data and identify risks, predict compliance issues and improve coordination among firms’ business lines and legal entities.
Learn more about how regulatory technology solutions can help the financial industry.
RegTech, in fact, provides an ideal platform for growth. In addition to helping companies meet regulatory standards, RegTech can speed up new product development, streamline operations, reduce overhead and improve customer service. It also gives banks more control not only over compliance and its associated cost, but their entire operations’ activities. The result, when combined with a strong risk culture: Firms can promote growth while providing better protection against risk and reputational damage.
For instance, RegTech can help banks ensure that new account growth doesn’t lead to credit quality concerns or violate U.S. bank secrecy and money laundering laws. And it can help financial firms improve cybersecurity by having them rely less on low cost providers with manual and often inconsistent standards and other vulnerabilities.
RegTech also has the potential to reinvent and streamline the regulatory process itself. By using real-time surveillance and data analytics, regulators around the world are able to enhance supervision and provide clearer guidance on a number of issues, including outsourcing requirements and privacy laws related to cloud computing and other related technologies.
The need to automate compliance has become even more critical as companies revamp old business models because of disruptive technologies and increased competition. But in order to make the most of regulatory technology, companies need to take some initial steps:
Be proactive. Initiate discussions with regulators to foster engagement and explain how RegTech innovations could improve compliance.
Keep an inventory. Assess your firm’s existing technology for regulatory compliance, especially how it functions among the different business lines, and identify strategic linkages and critical interdependencies.
Decide what you need. Figure out what RegTech could add to your business. Determine whether you should build it yourself, buy it or team up with RegTech and financial technology providers.
Don’t delay. RegTech can often be implemented quickly and relatively easily end-to-end or among different parts of a business to target specific and complex issues.
Financial companies still need to be mindful of the unintended risks of any transformative technology. As firms adopt RegTech, they must address issues such as algorithmic biases and insufficiently robust data security and cybersecurity measures. So companies will have to monitor any RegTech initiatives to make sure they are effective.
For financial institutions, RegTech can improve all aspects of their business. It already has helped companies respond to increased regulatory expectations while reducing costs, increasing enterprise-wide coordination, and making firms’ business strategies more agile.
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