The credit crisis of 2008 resulted in regulatory norms in the financial services industry going through a significant overhaul. Since then, the regulatory climate has witnessed multiple changes, fines and penalties, and financial services institutions have found the continuous onslaught demanding and challenging.
With most regulations being information demanding, financial institutions have been compelled to pay more attention to their back offices and spend significant costs on people and processes for compliance and risk management more than ever before.
Since then, financial institutions have turned to technology to help them address, deploy and comply with regulations, thereby, giving rise to the concept of RegTech or Regulatory Technology. RegTech is a subclass of what is commonly known as ‘Fintech’ (Financial technology), which initially incorporated technology into the financial services industry to improve operational and customer engagement capabilities.
RegTech solutions are aimed at gaining significant savings in cost and effort and automatic reporting of the information demanded by each of the concerned supervisory bodies in a more accurate manner.
RegTech is not a single and unique solution all the time. The solution can vary depending on the type of financial institution and the regulatory requirements that they face in their market. For e.g., RegTech solutions catering to regulatory reporting are different from those intended for KYC (Know-your-customer) or AML (Anti-Money Laundering) regulatory compliance.