26 September 2017
Reetu Khosla

Reetu Khosla

Reetu Khosla - Pegasystems

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To meet complex KYC and Onboarding regulations RegTech needs to be industrial strength

25 October 2016  |  8596 views  |  0

 

Regtech is being added to the canon of financial technology buzzwords. But what does it offer and how should the industry embrace this concept?

This increasingly common term is a subset of the fintech movement to find smarter technology solutions to solving difficult problems or tapping into great opportunities for revenue. Essentially regtech is aiming to simplify and speed up compliance and release of regulatory requirements linked to onboarding new and existing customers. 

Accelerating and improving onboarding and know your customer (KYC) processes  are essential to not only meet regulations but stay competitive in a digital and global marketplace. Large and often changing regulatory requirements and enforcement are impacting onboarding times globally. This combined with the impact on time to revenue and customer experience is driving banks to re-establish their regulatory and onboarding processes across jurisdictions, lines of business, and client base. As a result, the major global banks are investing in KYC, regulatory, and onboarding technology not only to reduce the impact on costs but as part of the broader digital transformation agenda. And they need to do it fast to not only stay competitive, but to minimize the impact of regulatory scrutiny while keeping up with the constant change.

Complex due diligence requirements are relentlessly affecting the onboarding process, for example. In a recent survey, 88 percent of banks believe that KYC due diligence requirements are affecting onboarding times. What’s more concerning is that only 21 percent of banks believe their current KYC technology is flexible enough to rapidly handle changing rules. In an age when digital disruptors are infringing on banks’ clientele already, many are at an even further disadvantage due to older legacy systems and silos that can’t keep up with the constant changes.

So, a need for a streamlined, dedicated solution makes regtech attractive. But in advancing a RegTech strategy what should you consider?

Possibly the most vital part of the regtech equation is its ability to ensure banks remain compliant with ever-changing and increasingly complex regulatory rules like AML/CTF, FACTA, CRS, EMIR, MiFID II, Suitability, Dodd-Frank, and more. The most innovative banks understand this pace of change is nearly impossible to keep up with, and therefore are turning to regulatory technology for their compliance needs. Top banks are using regtech to rapidly respond to audit and regulatory findings with capabilities including automated bulk case creation, routing, and escalation, as well as auditability of rule changes. Regulations are increasing, enforcement is harsher and customers are less patient.

In reaching out for solutions, there is a risk that regtech could be deployed as point solutions and create new operational silos that’ll get in the way of future efficiencies and innovations.  Such solutions need to be part of a broader client lifecycle management and digital transformation technology that offers  front-to-back office onboarding, a global view of customer and the ability to drive multi-jurisdictional and multi-product onboarding on a global scale.

Additionally, the regtech solution must manage and control regulatory changes without hard recoding to keep pace with regulatory changes.  Having the ability to quickly update rules and rapidly address new findings decreases the amount of manual labor involved as well as risk.

A prime goal of regtech is understand and benefit from global compliance, cost savings and revenue gains much faster. By avoiding a siloed deployment, financial institutions can use regtech to cut  onboarding time and costs by approximately 70 percent during the onboarding process. This also means faster time to transact and a digital experience for the customer.

So in reviewing regtech, the bigger picture is always vital. Banks that want to move forward with RegTech should ensure it is flawlessly unified with fintech and digital transformation in  their day-to-day operations so they can keep up with the digital times.  

TagsRisk & regulation

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job title Sr. Director Risk, Compliance, and Onboarding
location Boston
member since 2012
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Reetu Khosla is Sr. Director Risk, Compliance, and Onboarding at Pegasystems. She has several years of regulatory experience in the banking and non-banking sectors, specialising in financial crimes, n...

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