eComms Surveillance & Compliance for Financial Services
During 2018 I was fortunate enough to have been working with financial institutes from all across the globe, and it would be “old news” if I said that RegTech solutions are in higher and higher demand. Regulatory constraints, on the one hand, client expectation for frictionless experiences on the other, and tangible, ever-growing cybersecurity threats that target financial institutes primarily (for a variety of reasons), together make a powerful combination that cannot be ignored.
Obviously, different institutions have different needs, and certain constraints may vary while playing a significant role in one country, be irrelevant altogether in others – and yet – regardless of territory or institute type, one can see patterns of a new, more advanced, strategic thinking opposing the more common tactical approach.
RegTech solutions are essentially data solutions: Tracking – Analyzing – (smart) Storing – Extracting, all heavily dependent on machine learning capabilities. Treat those in a tactical fashion, and you’ll end up with all kinds of different solutions, data silos, and potential IT mess…
More and more financial institutions now take a more proactive, strategic approach, and see RegTech not as an isolated list of problems to be solved but as part of a more holistic view of the complete digitization process, one that plays an integral part of the ongoing data assessments, client onboarding, and other processes.
The fast pace of innovation in both technology and business models forces regulators to act fast and adjust to new environments and regulations in order to keep up with new concepts. Much like a tightrope walker preserving delicate balance, the regulator must allow innovation to flourish on the one hand, yet without compromising users’ safety on the other.
Regulatory constraints, though may be regarded as beneficial in the long run, for financial institutes in the short run are always a hustle, and as such, are seen as merely a burden. But this perspective is no longer sustainable. As regulatory changes are more frequent and diverse, each change cannot be viewed as a separate, unique event, instead, here as well a strategic approach is needed. Indeed, financial institutes are incrementally seeing such change not just as inevitable, but well accepted and even welcomed – by building a system that is flexible at its core, and utilizing AI capabilities to detect/automate much of the needed processes. Adapting to the regulatory change(s) becomes a fertile ground for having digitalization truly beneficiary and not just a necessity.
Multinational financial institutes, with a lack of regulatory standardization, are dealing with different, parallel regulations. Those who take the strategic approach are leveraging AI and RPA to create complete regulation-oriented processes, allowing them to take off the burden of multi-regulation constraints where automated capabilities are performing real-time assessments, corrections (or for the very least – alerts), and in effect create a more unified/standardized regulatory environment. Looking ahead, the adoption of such a strategic approach together with evolving technologies may, in turn, affect regulation as much as regulation affects financial processes and technologies.
Taking the Strategic approach is not just about lowering costs or optimizing operational efficiency, but goes further, it allows decision-makers in the company, especially risk managers and compliance facilitators to take a huge mental load off, and focus on revenue-generating ideas and activities. Furthermore, it can reduce capital reserves currently needed by significantly lowering the potentially disastrous outcomes of failures. RegTech becomes a vehicle that goes far beyond compliance and “following regulation demands” to become a real change enabler.
Compliance is no longer just the Risk & Compliance Manager problem and is better categorized as a business operation issue. Moreover, the ever-changing and naturally fragmented nature of regulation requires the understanding that no stand-alone solution is going to work long-term, hence there’s a need for an architecture that will allow flexibility and scalability – from the ground up…