RegTech solutions have become increasingly critical for banks looking to accelerate digital transformation initiatives to power operational efficiency and ultimately, growth. 

While compliance teams value the speed, accuracy and control that RegTech solutions provide, executives see benefits in the efficiency and scalability that is delivered. I recently shared a short report on the relationship between banks and RegTech providers in North America, the impact of RegTech solutions, and more. I’ve included some of those perspectives in the short piece below and the full report is available via my LinkedIn page.  

The state of the relationship between RegTech providers and banks is no doubt maturing. Today, Banks are more open to adopting RegTech solutions than ever, as they have been shown to significantly help in response to evolving regulations and improving operational efficiency. Banks hoping to move beyond a manual, spreadsheet-based response are now actively looking to technologies like automation to give them an edge. As industry leader Jo Ann Barefoot of Alliance for Innovative Regulation noted in the aforementioned report “The relationship is reaching an inflection point, where the ability for banks to work with RegTechs is accelerating. Banks need better tools and RegTechs are fast working to build them.” 

While RegTech solutions often have the most impact for a bank’s compliance operations in the short-term, the long-term impact is usually even more critical.  RegTechs can provide significant, positive short-term improvements, relief or remedy for a bank’s compliance operations, especially in situations where the incumbent solution(s) requires manual processing. Wherever technology, digitization and automation can effectively supplant human effort, you’re going to see a big impact in terms of immediate time saving and completeness. Longer term, however it’s worth keeping in mind that RegTechs are likely to have a deeper, more entrenched impact, and be able to move the outcomes of compliance efforts closer to the intention of the regulator. As well as contribute to the Bank’s commercial and strategic goals like enabling future digital operating models, integration with other technologies and ultimately enhanced customer experience and profitability. Unfortunately given typical Bank budgeting and procurement processes it can be difficult to engage stakeholders who benefit on different horizons and the full impact is not always recognized or articulated. 

Innovative RegTech use cases in banking are being deployed today and delivering value. Some very interesting use cases for RegTech involve addressing today’s most pressing issues, such as such as ESG, consumer data protection, sanctions, and bringing greater levels of trust and transparency to crypto. RegTechs will be an effective partner in helping financial institutions tackle regulatory changes, from keeping track of new sanctions on entities, to meeting updated beneficial ownership requirements. RegTechs will also be able to help banks achieve an ‘always-on’ or ‘perpetual’ KYC model (pKYC) that will make the compliance process significantly faster, more effective, and less costly. As Leica Ison, deputy chair and non-executive director of the RegTech Association has observed “We’re seeing an exciting intersection of technology coming together with regulation — things like artificial intelligence, machine learning and cloud platforms — to solve real problems.”