Compliance is the first step, but RegTech is so much more.When thinking about RegTech, regulations are the first thought. It’s right there in the name! The practical application is compliance, allowing companies to ease the burden of gathering data and then analyzing, monitoring, reporting and recording that data to ensure the company is following the law.

There’s a whole host of financial regulations already in place, have an upcoming implementation date, or are making their way through the legislative process, that rightfully have the attention of financial services companies doing business across borders. Basell III, Dodd-Frank, MiFID II, IFRS 9, and PSD2, are just some of the regulations that have to be considered as well as AML and KYC laws.

Companies need to understand these laws, create strategies, determine responsibilities, define workflows, implement procedures, perform operations and monitor results; of course, financial institutions (FIs) are focusing on the compliance aspect of RegTech.

But RegTech can be so much more; as FIs are going through the processes anyways, there is a massive opportunity to re-examine their operations to take advantage of new technology and systems. As opposed to putting out ‘fires’ one by one, now is the time to implement a comprehensive ‘fire’ prevention program.

What are some of the new operational aspects that RegTech introduces?

Cloud Computing

Banks and other FIs are known for using mainframes, large centralized computer systems. While that model has advantages for control and security — two important factors for FIs — it has disadvantages for flexibility, maintenance and cost.

Established FIs though, don’t have to suddenly do a rethink of their entire technical infrastructure. Rather, they can implement cloud features on a case by case basis; that’s the beauty of the cloud, it’s comparatively easy to implement. Security is kept at a high level as the core infrastructure is kept in place and cloud technology has modern-day security implementation.


Just as the cloud diversifies computing power, APIs diversify applications; now, applications and data are easily accessed from multiple vendors and are not limited by to a FIs mainframe. To make the point obvious, why create a whole mapping database and program to help clients find a nearby location where you can simply make a call to the Google Maps API?

A huge range of powerful services are available, available with an account and standard programming procedures. At last count there were over 15,000 APIs and while many are not relevant to FIs, it still provides many options and capabilities that don’t need to be developed from scratch.

The beauty of this model is the targeted nature of each API; they do a specific set of tasks and can excel at those tasks. Consider Trulioo’s API and its focus on identity verification. By focusing our time and energy on this one task, we understand the nature of the process deeply. Do FIs want to duplicate the time and effort? Or, is it better to outsource and focus their energies on other aspects?

Real-Time Monitoring

As the financial meltdown of 2008 demonstrates, financial turbulence can start and spread quickly. While the underlying problems usually develop over years, once the root issue becomes untenable the resulting chaos is hard to control.

Filings and static reports that offer little more than a historical perspective don’t offer regulators a chance to chance to nip major issues in the bud quick enough. Real time monitoring is a new solution to prevent financial disasters and protect the public (and the institutions themselves).

Before, monthly reports were onerous enough for compliance. Now though, technology can monitor capital and liquidity on an ongoing basis. Stress tests to ensure solvency aren’t limited to one-time events, but can be ongoing, as market conditions change. If FIs and regulators are on top of it and sharing the relevant information, red-flags will be caught before causing major issues.

Modeling and Forecasting

Once the full array of data is available instantly, the analysis can go much further than compliance. The same steps that are necessary to provide real-time compliance enable new scenario modeling and forecasting abilities. As events and markets move so fast, developing a comprehensive strategy on the fly is difficult, if not impossible. By modelling different situations beforehand, a FI can determine their strategy and act without hesitation for numerous cases.

The FIs will also be able to smooth out their forecasting models. Regardless of events, FIs with effective forecasting will know the effects well before their competitors do.

Behavioral Analytics

The ultimate in modelling involves analyzing actual behavior. By better understanding actual traders, and how they trade, FIs can improve their risk analysis, oversight and hopefully, positive trades. When tied back into advanced modelling, behavioral analytics can help traders better understand the financial environment and how they react to it.

The deeper insights can also be applied to consumers and their financial behavior. Which way is the herd running and why? What opportunities and messaging are most appropriate to recommend and pursue?

RegTech, applying technology to regulations, enables a whole new era in accessing, managing, normalizing, and systematizing data. By creating an effective game plan and properly taking care of it now, FIs will set themselves up for long-term success!