As more banks concentrate on digital transformation to power growth and operational efficiency, the opportunity to simultaneously leverage technology to mitigate risk and promote transparency - particularly via RegTech solutions, is continuing to increase in relevance globally. 

This is a topic that I discussed as part of a panel of industry experts, facilitated by Rise, by Barclays New York, during their 'Rise Presents: RegTech Conquers Moral Hazard' event earlier in H1. The panel comprised of representatives crossing financial institutions, technology providers and regulators. We put the need for and future of RegTech under the microscope, highlighting how technology solutions are being used to address some of the biggest regulatory, risk, ethics and ESG challenges facing the financial services industry. 

The promise and opportunity with RegTech 

Not surprisingly, the overarching thread that RegTech is critical emerged from the discussion, as banks look to comply with an ever-changing regulatory landscape while balancing the need to meet evolving customer expectations - and all against the backdrop of cost pressures. 

For compliance teams, the value in solutions is seen in the speed, accuracy, and control that they provide. At an executive level – when the focus is on growth and profitability - the efficiency and scalability that is delivered by innovative RegTech solutions has never been more important – leading to increased adoption. 

Looking more closely at some examples, RegTech can help to address challenges banks are facing in several different ways, from monitoring for and responding to the regulatory changes from regulators, to automating company ownership discovery to meet Know Your Customer (KYC) and corporate transparency requirements, to enhancing risk analysis and reporting across ever larger data sets.  

Central to how any of these solutions are utilized - and the degree of impact - is people. Within banks today, we are seeing a convergence of roles and skillsets, as individuals see themselves as more than solely a ‘compliance person’, a ‘risk’ person or a ‘tech person’. When people can work beyond the restrictions of traditional roles, technology, product and risk can evolve and come together to build better solutions. Of course, organizational structures and budget processes are realities that need to be considered and catered to achieve this and effect change. 

Beyond the bank 

When looking at how RegTech can play an even bigger role in tackling some of the most pertinent issues being faced by institutions, we must remember that regulators also have a key role to play in shaping attitudes to adoption. For the benefits of RegTech to be truly realized, and material change to happen, it is imperative regulators understand the market, the technology behind the solutions available and emerging, and champion the place of innovation. This is particularly important when seeking to influence the attitudes and appetites of those who are still heavily reliant on traditional manual processes to prove compliance – for example, when it comes to KYC/AML due diligence activities. Around the world, some of the most progressive regulators are making big strides in deploying technology for their own practices and supervision, as well as actively promoting the use of technology to meet regulatory requirements through consultations, sandboxes and hackathons. Naturally, some areas are more progressive than others.  

What can we expect going forward?  

With plenty more RegTech conversations on the calendar for H2 I’m looking forward to discussing: 

- The adoption of AI in RegTech and in general, and particularly the need for explainability and repeatability of anything being deployed. 

- The increasing relevance of RegTech, as banks are expected to make use of innovative solutions and industry standards rise as regulators become familiar with what is possible, and at what cost  

- Globalization of RegTech and the market categories, while jurisdictional regulatory differences will continue to present challenges and opportunities. 

The RegTech market has certainly matured. Financial institutions and vendors alike have become more pragmatic and realistic about what successful adoption requires. There has been consolidation in the market and the leading solutions have proven to be robust and value adding. Work remains to overcome barriers, bias towards 'the norm' and to accelerate procurement and adoption. While fears remain among some regulated parties of ‘being first’ or innovating faster than regulators - those who are able to engage regulators early and explain their technology vision and show controls are having success with innovation. Within the bank, moving beyond delineations of budgets and KPIs in order to solve problems holistically and create change will necessitate C-Level leader involvement. Firstly to recognize the benefits on offer for customers and the firm - and then to empower colleagues to make the brave leap beyond the safety of status quo or incremental improvement to digital operating models, enabling better customer experience.