Three Applications of cost-effective RegTech Solutions in the Financial Industry

According to stats, US banks spend $80 billion annually on compliance and risk management. This figure is estimated to reach $119 billion by 2020.

Despite these figures, companies annually pay more than $160 billion in fines for non-compliance with internal established by associations, which include banks or external established by the state requirements, norms and regulations. How can RegTech help in these conditions?

How RegTech works?

The financial services sector needs cheap and easy solutions to comply with laws and regulations. Such solutions are offered by projects from the RegTech sphere. Today, more than 6,000 companies are representing RegTech in the market.

RegTech technologies provide fast, easily adaptable, easy to integrate, reliable, and relatively inexpensive solutions that fully comply with all regulatory standards.

RegTech actively uses the capabilities of BigData and artificial intelligence, which provides an advantage over traditional methods and saves time and money. AI capabilities are far superior to human ones in terms of speed and amount of processed information.

Where to Use RegTech Solutions?

For the financial sector, the most important use RegTech solutions for data analysis in the preparation of regulatory reporting, risk management, prevention and reduction of fraud.

Anti Money Laundering (AML)

In AML, the most important RegTech solutions for data analysis in the preparation of regulatory reporting, risk management, prevention and reduction of fraud.

In Asia alone, financial institutions spend about $1.5 billion annually on anti-money laundering. The main processes in this area are filtering lists of politically exposed persons (PEPs) and monitoring suspicious activity from small frauds to terrorist financing.

These institutions require considerable resources, and several RegTech solutions to significantly reduce the cost of these procedures.

Know Your Customer (KYC):

Know your customer is an initial review policy following the requirements established by regulatory authorities.

Identity verification of the client is a win-win process. For instance, Banks establish the level of risk tolerance of clients, investment preferences and the likelihood of involvement in illegal activities. In turn, customers receive exactly those categories of accounts and services that are most relevant to their real needs.

KYC Solution standard mechanisms include customer approval, an identification process based on personal information, tracking unusual transactions, risk management, for example, setting filters that regulate the type and amount of financial transactions for a particular client.

Cyber Security:

Another critical aspect of the success of any financial enterprise. News about cyber attacks comes almost weekly, and Forbes reports that according to Juniper Research, the global loss from hacker attacks by 2019 will amount to $ 2 trillion.

In this sector, RegTech solutions assist in numerous ways. For example, Multi-factor customer identification. This technology is changing the way customers are identified previously. Old SMS verification or password authentication methods are replaced by new innovative ways. Biometric verification such as fingerprint, facial, and retinal verifications is a new way of identification.

The development of technology does not stand still, and the RegTech market already now offers an extensive set of tools for financial sector companies, the advantages of which are obvious:

Firstly, this is a significant reduction in costs – regtech services are cheaper than traditional methods of regulation and verification of compliance with the law. Secondly, AI and BigData methods allow you to analyze and structure even those data that were not previously covered, which indirectly affects profit growth.

Regtech solutions are not only profitable to use. It is beneficial to invest in them. Already now investments in regtech promise an ROI of 600% with a payback period of fewer than three years. Reuters experts’ calculations show that by 2020, only in the United States, the RegTech market will be valued at $ 120 billion

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