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RegTech Solutions for Banks: How It Can Be Utilized
RegTech Solutions for Banks: How It Can Be Utilized
Improve the efficiency of your banking operations with RegTech. Learn what RegTech solutions for banks are and embrace the future of regulatory compliance.
Fintech
February 1, 2024
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Mobinul Islam Riyadh
Sadman Sakib Khan
Sadman Sakib Khan

Sadman is a marketing professional and a fervent devotee of the ever-evolving world of marketing & technology. Possessing a knack for crafting compelling narratives, Sadman passionately engages in the creation of top-tier content in close partnership with esteemed subject matter experts.

Managing regulatory compliance can be a tough challenge for banking institutions today. If you are reading this blog, you may feel the same way, like numerous entrepreneurs worldwide. Where is that regulatory compliance lifeline everyone’s searching for? That lifeline lies in RegTech.The RegTech industry is booming, with a whopping 7.6 billion USD in 2021, and it’s expected to soar to 19.5 billion USD by 2026. Why? Well, the increasing compliance costs and the growing number of regulatory changes are pushing more banking institutions to embrace technological solutions.However, when it comes to technological solutions, many bank managers are left scratching their heads, not knowing where to start. Don’t worry, we’ve got you covered. Here, we’re going to discuss what RegTech solutions for banks are and their importance.

What Does RegTech Mean in The Banking Sector?

RegTech, short for regulatory technology, is a phrase used to explain regulatory compliance management through the assistance of technological innovations. This term first came about after the 2008 global financial crisis, which led to the introduction of new financial rules.

RegTech companies operate with banking services by utilizing big data, artificial intelligence, and cloud computing to facilitate secure and quick information sharing. In particular, artificial intelligence (AI) is a crucial component of RegTech. AI technologies work with large datasets, make predictions, and detect patterns.

According to Juniper research, embracing RegTech and AI solutions in banks is expected to result in more than $460 million in cost savings between 2020 and 2025. They also predict that investment in RegTech will go beyond $130 billion in 2025, up from $33 billion in 2020.

Thomson Reuters reveals that asignificant majority of G-SIFI firms view RegTech innovation mostly positively or extremely positively. Also, as per a report from Global Information, Inc.  –

The Global RegTech Market size is expected to reach $22.3 billion by 2027, rising at a market growth of 19.8% CAGR during the forecast period.

How Can RegTech Be Utilized in Banking Solutions?

ID Verification

ID verification is crucial to decreasing money laundering risks, but it is also a big hassle. Especially with “risky” groups of consumers who need extra careful screening, the entire process can take double the time. Banks using RegTech solutions can eliminate this manual KYC process completely. Not only do they save time, but they also dig deep into details, like scanning phone calls.

RegTech solutions can even analyze speech and handwritten text to confirm an individual’s identity. This adds an extra layer of security to the online ID verification procedure. The top RegTech companies for ID verification include LexisNexis, Kroll, NICE, Fenergo, and more.

Regulatory Compliance

The main reason behind the surge of RegTech is that it makes managing regulatory compliance much easier. Thanks to automation, big data, and cloud computing, banking institutions can simplify regulatory processes. 

RegTech companies examine and support regulatory changes to make sure that processes and policies smoothly adjust to different qualifications. They monitor both existing and upcoming regulations. Some of the companies that offer RegTech compliance products include BottomLine, Darktrace, FlexTrade, Broadridge, and more.

Risk Analysis

RegTech solutions can quickly process large volumes of data for banks, and, they pay careful attention to even the smallest details. These solutions excel at identifying and managing risks before they occur.  

RegTech solutions monitor high-risk scenarios and predict potential fraudulent activities by analyzing situations based on behaviors and past activities. The aim of these solutions is to identify, prevent, and foresee both current and future threats. The key RegTech companies in this sector include Finastra, Cleversoft, Nintex, and others.

Transaction Monitoring Process

Transaction monitoring is a continuous and challenging task for banking institutions. Imagine the number of transactions you can monitor manually — it is just a tiny fraction of the total number. However, you still need to report every fraudulent transfer. Sounds overwhelming, right? The best solution to eliminate this hassle is to go for RegTech technologies.

These technologies can monitor each transaction in real-time and alert you when anything suspicious comes up. It’s the fastest monitoring speed you can get ever. This category mainly involves AML RegTech solutions, with major players like Feedzai, IDology, Appzen, and others leading the way.

Regulatory Reporting

RegTech solutions play a vital role in alerting banks about instant changes in regulatory reporting. This ensures they fulfill their reporting duties and stay in line with regulatory standards. 

Banking institutions can automate the task of collecting and presenting their data to fulfill compliance requirements, cutting down on costs and time. In this segment, the leading RegTech service providers include Sensiple, BearingPoint, VERMEG, and more.

How Are RegTech Solutions Shaping The Future for Banks?

Potential Effects of RegTech Solutions on The Banking Sector 

RegTech solutions can make a big impact on the banking industry in various ways. First off, they can lower compliance costs and boost regulatory compliance by monitoring regulatory changes in real time and automating tasks. This not only saves banks resources and time but also lowers the chances of non-compliance. 

Secondly, RegTech technologies can improve the customer experience by simplifying procedures and decreasing the effort and time needed to make transactions. This can increase customers’ loyalty and satisfaction, assisting banks in retaining their consumers and growing their business.

And finally, RegTech solutions can boost data security and lower the risk of cyberattacks and fraudulent activities. They do this by monitoring and analyzing activities and transactions in real time. This can assist banks to detect and solve potential security risks before they cause a lot of harm.

New Trends in RegTech for Banking Institutions 

RegTech solutions in banking are set to grow big time in the next few years. This is mainly because the complexity and regulatory requirements are increasing day by day in the banking sector. A growing trend is using machine learning and artificial intelligence technologies to automate compliance procedures, which include reporting and monitoring. 

Another emerging trend is using blockchain technology to boost transparency and data security. It also helps with making regulatory reporting easier. Furthermore, more and more people are liking cloud-based solutions because of their cost-effectiveness, scalability, and flexibility.

In the end, RegTech solutions are set to be crucial in helping banks abide by regulatory requirements effectively. At the same time, these solutions will boost the customer experience and operational efficiencies for banks.

Regulatory Outlook for RegTech Technologies

Regulators are usually positive about RegTech solutions, seeing their potential to improve risk management and compliance in the banking industry. They are pushing banks and other financial organizations to use RegTech software. 

Some are even teaming up with RegTech companies to create and put new technologies into action. However, it’s not all smooth sailing. RegTech companies also face some regulatory challenges. For instance, RegTech solutions must follow a variety of security and data privacy rules. Furthermore, they need to show that they fulfill regulatory requirements for reliability and accuracy.

Conclusion

This article has shed light on what RegTech solutions for banks are and discussed why these solutions are crucial. They help banks ensure regulatory compliance, lower risks, and improve operational efficiency. 

RegTech solutions are powered by data analytics, AI, and  ML and provide a wide variety of features to simplify banking operations, including detecting fraud and automating KYC processes. Banking institutions that embraced RegTech solutions have saved valuable money and time.