Innovations in Identity


RegTech Innovation: Improving Compliance and Access


Republished: September 6, 2017, updated to reflect the latest industry news, trends and insights.

Innovations in RegTech are Revolutionizing Compliance, Enabling New Opportunities for FIs, Fintechs and Financial Inclusion

In life, there always seems to be a battle between risk and reward. Take a chance, something great can come about versus don’t rock the boat, it can lead to trouble. Whether it’s politics (conservative vs progressive), personal life decisions (a new job versus the tried and true) or finance (cost benefit analysis), we tend to always connect increasing risk with an increase in potential reward.

For financial institutions (FI’s), many on the revenue generation side look at compliance as a hindrance, limiting their revenue potential. And, those on the compliance side, may perceive some business practices inviting undue risks, pushing the envelope of good judgement.

But what if increasing compliance can not only can decrease risk, but simultaneously, increase revenue? Welcome to the new world of RegTech (regulation technology), which promises to ease the burden of compliance, improve insight, and enable new revenue opportunities.

Heralded by Deloitte as the “the new FinTech,” RegTech quickly rose to prominence in 2015. As it’s name implies, regulation technology, according to Deloitte, seeks to provide “nimble, configurable, easy to integrate, reliable, secure and cost-effective” regulatory solutions. However, as Deloitte also notes, “RegTech will mean different things to different people in this developing area.”

For banks’ bottom lines and for customers wanting quick onboarding, the new technology for digitizing manual reporting and compliance processes eases the burden of compliance and lowers operational costs. Instead of hiring 8,000 new compliance employees (like JP Morgan) to manage the paperwork, forward-thinking FIs are taking advantage of automation and algorithms to process compliance information faster and more accurately.

Financial Evolution

RegTech is not only good for FIs, but also the regulators themselves. Financial evolution is bringing about whole new areas of regulatory concerns; from new financial instruments to complex multi-party international transactions, how can risk and fraud be managed both in-house and for the whole financial system? More complex regulatory requirements imply more data to check, more information to analyze. If the regulators can’t analyze what they are asking for, why ask for it in the first place?

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.

RegTech Supply Chain

RegTech Supply Chain


Onboarding refers to signing up new customers and the process they go through to become users. To counter threats from money laundering and Anti-Terrorism Financing, financial institutions must be able to identify the individual and perform various checks to ensure the customer and their funds are legitimate.

RegTech Supply Chain - MonitoringMonitoring

Monitoring refers to the analysis of continual, ongoing activities to ensure activities remain in compliance, such as exceeding thresholds, suspicious activities, change of status, recording of communications, surveillance of employees, watchlists, market trends, new regulations, and trade data.

RegTech Supply Chain - DetectionDetection

There are various activities to keep track of, such as signs of risk signals and fraud flags, and various other market and transaction detection needs. Financial institutions must use detection tools to ensure fraud is not committed, or that money laundering or terrorist financing funds enter their system.

RegTech Reporting ToolsReporting

Reporting to regulators is critical to ensure their compliance requirements are met. FIs must use reporting tools to ensure that they effectively meet all compliance requirements and maintain the trust of regulators, customers, partners, and investors.

RegTech Supply Chain - Process Tools

Process Tools

Process tools and controls help support consistency across each process from onboarding, monitoring, detection, and reporting. Controls ensure that all requirements are met across each process, which is essential for meeting compliance requirements and mitigating potential risks.

RegTech resources:


RegTech partnershipThe Need for Smart Partnerships in RegTech

By leveraging the advantages offered by RegTech solutions, fintech companies can decisively address concerns that banks might have about risk in the sector. Companies that adopt RegTech make a strong statement by showing their commitment to innovation in regulatory compliance.


RegTech companiesRegTech: Making Fintech Safer for the Future

“Businesses are only as strong as their weakest link, which is often outside of their direct sphere of influence,” said Jon Jones, President at Trulioo. “Any RegTech solution needs to be fully transparent and trusted in regards to data flow, data retention, data use – all elements that we take to heart.


RegTech companiesRegTech: Top 10 Highlights from Around the World

By 2020, the demand for governance, regulatory, and compliance (GRC) software worldwide is expected to be just under $120 billion. Although RegTech solutions could lead to a 600 percent return on investment with a payback period of under three years , most financial service providers are still slow to invest in RegTech.


regtech providersRegTech: A Dream Come True for FinServ

As it becomes more feasible to use RegTech solutions to automate the compliance process, many gains can be expected. Some of these gains include better customer experience, greater financial inclusion, improved Know Your Customer (KYC) compliance, increased profitability, and lower operating costs.


RegTechRegTech: Solutions for Regulatory Compliance Requirements

The Institute of International Finance reported that a major U.S. bank said in a 2014 letter to its shareholders that it spent $2 billion to hire 13,000 new employees between 2012 and 2014 to support its regulatory compliance function. During that same period, this bank spent $600 million on regulatory and control technology.


RegTech in the News:

Move Over Fintech, AI is Here

The strict regulatory fashion of the finance industry makes it an ideal sector to invest in AI, because the technology can automate tasks that are based on specific systems, set rules and procedures.

Will Regtech Kill Bank Jobs?

For those who work in compliance, the big question is whether advanced technologies like artificial intelligence and blockchain will ultimately replace people.

Banks Hope Regtech Can Adapt To Easing Oversight

Dilip Krishna, a managing director at Deloitte & Touche LLP specializing in risk analytics, states, “A lot of the investment that banks made has been strategic in nature, not tactical. And if it is strategic, what they have done is they have basically given themselves additional flexibility to do not just regulatory work, but even allow themselves to be much better prepared to deal with other implications to their business.”

New Technologies and Anti-Money Laundering Compliance (FCA Report)

It is clear that new and emerging technologies have genuine potential to have a transformative impact on AML compliance, both in helping to prevent money laundering and in reducing the cost of compliance.

Digital identity, Virtual Sash and RegTech on Australian Regulatory Agenda

Asic commissioner John Price says, “Asic does not regulate RegTech directly but we do want to promote it to improve compliance outcomes, and think we have an important role to play as a facilitator of RegTech engagement within the sector.”

Regtech Report Encourages Regulators to Innovate and US to Participate more in Fintech-Aided Compliance

Commenting in a statement released with the report, Daniel Morgan, director of policy and regulation at Innovate Finance, claimed that: “The second wave of [regtech] systems will fundamentally reduce the cost and burden of regulation and require a radical rethink of regulatory processes.”

FinTech and RegTech – What Next for Financial Crime’s International Standard Setter?

It is therefore imperative that a thorough assessment of the transformative possibilities of technology in tackling financial crime is taken, and that organisations such as FATF and national regulators drive forward innovation as a means not only of making the financial system more efficient for its users, but also more effective at disrupting and reducing the harm that illicit financial flows cause to the same system.

International RegTech Association Launches, Lists Executive Board Members

The non-profit International RegTech Association (IRTA), incorporated in Switzerland in May, has launched to provide a united community of individuals and organizations, with a shared vision to innovate, advance, and influence the future of Regulatory Technology (Regtech).

The information in this blog is intended for public discussion and educational purposes only. It does not constitute legal advice.

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