The power of RegTech goes beyond just simplifying compliance and cutting costs. It secures competitive advantage, Andrew Yuille, Head of Risk Business Solutions, tells Finextra.
About US$80 billion is currently being spent on regulatory compliance across the financial industry, a figure set to rise by 50% to $120 billion in the next five years.
That’s a lot of resources not being spent in other areas, such as new products, on meeting capital adequacy requirements or returning cash to shareholders.
It’s also money that could help make institutions more competitive.
As this cost burden continues to rise, it’s no wonder that RegTech is attracting considerable interest and investment from risk and compliance professionals.
RegTech solutions are already a powerful force as the industry seeks more digital-centric and innovative ways of reducing costs.
This was highlighted in our Cost of Compliance 2017 report, with firms signalling their willingness to find alternatives to ever-increasing regulatory budgets.
Thomson Reuters KYC as a Service is a great example of a RegTech solution that is working effectively to help financial institutions deal with their compliance requirements.
This Know Your Customer (KYC) product accelerates onboarding, improves the experience for the customer and delivers cost savings and simplification for organizations adopting it.
As it can sometimes take three to six months to gather KYC documentation, it makes more sense to build that record once and share it across organizations that need it.
The pace of international regulatory change has increased over the last ten years.
If we go back to 2008, we were tracking about 10 regulatory changes per day, whereas in 2016, we were tracking over 200 changes per day in regulation.
Institutions are forced to use resources to track these regulatory events, determine how relevant each event is to the business and then decide on whether there are changes that need to be made to policies and procedures.
Integrating Regulatory Change Management solutions directly into compliance workflows is just one area that is already benefiting from RegTech innovation.
Our own market-leading solution connects the regulatory content and change management process to organizational structures, policies, risks and controls, streamlining the effort of compliance teams.
The future of compliance beyond 2020 must be planned with the expectation of continued demands from regulators.
Against this backdrop, there is no doubt that the continued and considered application of RegTech will be essential for firms focused on delivering a positive customer experience and seeking to simplify compliance.