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August 3, 2021The Future of Regtech and Compliance
The “Insight”* defined RegTech as “solutions designed to make specific regulatory processes more effective and efficient, or larger, multi-faceted technology projects designed to modernise regulatory compliance functions across organisations”. This way, both in-house and outsourced solutions are captured.
Regulation and compliance worldwide are continuing to evolve which create an environment of increasing complexity. As a result many financial institutions are turning to regulatory technologies (RegTech) to help them cope with greater scrutiny and the potential for hefty fines for non-compliance.
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Not surprisingly, RegTech is increasingly seen as the bridge between the company and regulatory requirements, enabling the business to fulfil its regulatory obligations more efficiently and thus allowing it to focus on its core offering.
Last year, “Insight” conducted a research exploring the state of the RegTech market and the impact of COVID-19 on the sector.
The respondents in the study identified as biggest impact of RegTech the following:
- Ensured sector standards were met
- Improved accuracy and up to date policies
- Enabled quicker reporting
- Ensured compliance and acts as an effective preventive mechanism
Over the last decade, companies have experienced an increase in regulatory obligations, leading to a need to reprioritise internally. In the face of this demand for RegTech solutions has remained stable in 52% of the companies in the study or has increased in 43% of them.
The expectation among the industry is that RegTech will be more firmly established as a trusted partner post COVID-19. In the medium to long-term, most businesses from the research (60%) believe that the RegTech sector will remain important or grow in importance in the future, with many believing that RegTech adoption will be universal among firms (52%).
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However, in order for this to happen, RegTech companies have to solve the existing problems. The respondents in the research identified the communication and the ease of integration as main areas for improvement.
Source: The future of RegTech – what do firms really want?
Following the latest changes in the regulations and AML practices worldwide, it is fair to assume that although the term RegTech was only coined relatively recently, its future within the financial services sphere seems assured. We expect to see RegTech having a real impact on reversing de-risking and improving financial inclusion in the coming years
*Insight is a research project by the Financial Conduct Authority to help financial markets work effectively
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