The financial services industry radically changed after the crash in 2008, which led to introduction of a number of regulations. Since then the financial services sector has undergone a tremendous transformation driven largely by technological advancements.
In a bid to offer differentiated services, early adopters in the financial services domain embraced technology, giving rise to innovative offerings that disrupted the financial services sector. Today customers have numerous options when it comes to online payments, banking, shopping, and even interacting with friends and family.
Rising Regulatory Burden
Such innovation and convenience to customers may paint a rosy picture. However, it has also increased the threat of cyber attacks. Customers’ personal details are easily available on the internet and can be bought as easily in the dark web.
The steady increase in the number of data breaches has prompted regulators to take note of the rising financial losses that these cyber attacks inflict on businesses and customers alike. It has resulted in the introduction of new regulations – EU GDPR and PSD2 – mandating businesses to comply with the directives, else face hefty penalties.
Regulators have increasingly becoming demanding of the financial institutions to quickly share information on compliance and communication to the customers. With so many regulations to comply with and provide timely inputs to the regulators, compliance has become a burden for businesses – not just in terms of the efforts involved but also in terms of the costs attached.
Crystal Ball Gazing
RegTech, with its ability to harness data quickly and efficiently, can help businesses comply with a myriad of regulations and stay on the right side of the law in a cost-efficient manner.
Financial institutions can leverage RegTech – that uses advanced technologies, artificial intelligence and machine learning – to not only comply with the prevalent regulations but also avoid penalties and reputational losses due to non-compliance.
Using RegTech, financial institutions can save valuable time-to-respond and adapt to the evolving regulatory landscape changes. RegTech also enables financial institutions to fight fraud by effective transaction monitoring, conduct customer due diligence, and use hyper-personalization to enhance customer experience.
RegTech can even help regulators to adapt to the fragmented financial market of the future by way of efficient monitoring. Regulatory ‘sandboxes’ have already been put in place by the UK’s Financial Conduct Authority (FCA) and Singapore’s Monetary Authority of Singapore (MAS) to enable development of and testing innovative RegTech solutions before they are commercialized.
The Last Word
As RegTech gains prominence, it will collaborate closely with FinTech to give rise to a new order in the evolving financial service sector.
The Article has been Written by Neetu Katyal, Content and Marketing Consultant
She can be reached here.