The combination of regulation and technology – or RegTech – is increasingly seen as ’the next big thing’ to help firms cope with the elaborate web of data and reporting requirements they deal with.
On the side of the regulated, the world’s largest financial institutions are spending more than a billion dollars a year on increased regulatory compliance, according to TABB group, an international research and consulting firm, and global demand for compliance software is expected to exceed 100 billion dollars by 2020.
Dubbed ‘the new FinTech’ by Deloitte in 2015, RegTech has been steadily growing since then, particularly in the US, Canada and the UK. Regulators also are considering how to apply technology to meet and simplify regulatory requirements. For example, UK’s Financial Conduct Authority (FCA) uses big data analytics to more proactively protect consumers’ interests.
The International RegTech association (IRTA) defines it as a ‘digitisation’ of the regulatory process, saving firms money, time and billions in potential fines.
For accountants, the benefits of RegTech are endless: not only does it make good old-fashioned regulatory compliance easier, it can also help detect real-time market or operational risks, and set up ‘know your customer’ procedures to aid due diligence and combat financial crime.
The RegTech umbrella covers a variety of technologies, including data analytics, cloud computing, machine learning, voice-to-text capabilities, blockchain and biometrics. A concrete RegTech project, IRTA says, could be a new formatting language for financial regulation (for example, XML) that would be machine readable and could automate reporting across regions and countries.
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