Wolters Kluwer Research Demystifies RegTech

RegTech solutions hold the promise of encouraging and executing significant, disruptive change to the way financial institutions operate. That’s according to a new research paper from Wolters Kluwer’s Finance, Risk and Reporting business. “By taking RegTech-based data management capabilities developed ostensibly for compliance and reporting and adding a business information and intelligence component, the shared characteristics of the systems used in these two critical and continually changing endeavors can serve as the technological foundation for a more profitable, efficient enterprise,” the provider of integrated regulatory compliance and reporting solutions argues in a white paper released today.

The term “RegTech” is arguably a truncation of Regulatory Technology and an allusion to the more widely used expression FinTech, for Financial Technology, the vendor notes. The consultancy Deloitte defines FinTech as “the use of new technologies in the financial services industry to improve operational and customer engagement capabilities by leveraging analytics, data management and digital functions.” RegTech, meanwhile, applies similar methods to help institutions make lighter work of the substantially greater burden being imposed on them, now and over the next few years, by legislative and supervisory authorities around the world, Wolters Kluwer says.

RegTech, as a generally accepted concept, entered common usage among financial regulatory bodies and service providers only two or three years ago, after the UK’s Financial Conduct Authority (FCA) defined it as “a sub-set of FinTech that focuses on technologies that may facilitate the delivery of regulatory requirements more efficiently and effectively than existing capabilities.” Wolters Kluwer notes how it “swiftly became the designated term…for the application to regulatory reporting of general technological advances like in-memory storage and processing grids, cloud computing and artificial intelligence.”

Financial supervisors are now demanding more from institutions when it comes to compliance and reporting. Firms are being instructed to provide more complex and detailed submissions, more often, using a greater variety of measurement methods.

“And more does not just mean more. It means better,” Wolters Kluwer says in the white paper. “The information provided, covering risk ratios, balance sheet elements, all the way down to the transaction level, has to be more accurate and consistent than ever across the various departments of the organization that collects it, to the point that it’s bulletproof against the harshest scrutiny.”

The vendor goes on to suggest that “RegTech solutions hold the promise of encouraging and executing that significant, disruptive change to the way financial institutions operate. By taking RegTech-based data management capabilities developed ostensibly for compliance and reporting and adding a business information and intelligence component, the shared characteristics of the systems used in these two critical and continually changing endeavors can serve as the technological foundation for a more profitable, efficient enterprise.” These include the ability to compile and analyze data generated across multiple functions in a comprehensive, holistic fashion, as well as a dynamic and adaptable approach that allows firms to get ahead – of regulators, the competition, even customers – rather than merely keep up, Wolters Kluwer’s experts add.

That prospect could herald another disruptive change, in the way that senior management teams consider and employ compliance technology. “After spending the better part of a decade shelling out substantial sums for ever more elaborate pieces of tech to meet more onerous reporting requirements, it’s about time, many chief executives are saying, for the compliance department and its systems to start paying their own way,” the firm argues. “RegTech solutions, when designed and implemented to their greatest potential, can help them do that and contribute to the bottom line.”