RegTech has emerged as a cost-efficient method for corporations to comply with the changing regulations. The market size of RegTech is swelling at a CAGR of 23.5% and is expected to grow to $12.3 billion by 2023, says a report from Markets and Markets. The key drivers fueling the growth of the RegTech market, according to the said report, include rising costs of compliance, adoption of regulatory sandbox, and greater accessibility to Software-as-a-Service (SaaS)-based offerings.
The Data Woes
While RegTech is a promising solution for compliance woes, not everything is as smooth as it may appear at the surface. There are challenges that still need to be resolved. The biggest challenge seems to be data. Automation can deliver the desired results only when the input data is clean and unbiased, else the results are bound be off-track. The same data that makes RegTech efficient is also its nemesis, as not all data is usable and it must be processed to make it use-worthy.
Human Resource Requirements
Intensive human effort is required to improve the quality of data and large corporations have employed thousands of heads for this purpose. It is estimated that 10-15% of the total work force is currently dedicated to risk management and compliance activities. Going forward, with an increase in volumes of data and compliance requirements, the human resource requirements will also multiply manifold. However, skilled professionals with the relevant experience will be hard to find and it will be the organizations that will need to train the workforce.
Standardization of Data
Another challenge for RegTech is the standardization of data. Data is fast replacing documents. But, although regulators have subjected documents to audit, the same is not true for data. As a step towards standardization, regulators around the globe can take a cue from the Standard Business Reporting (SBR) in Australia. The Australian government has made significant efforts to provide a list of data fields and taxonomy for reporting to multiple agencies, while also working with the software industry to get software built using these data fields. The result is increased automation, savings of millions of dollars annually, and a data-centric compliance model.
The article has been written Neetu Katyal, Content and Marketing Consultant
She can be reached on LinkedIN