A chain reaction of rapid technological developments is happening around us constantly which is changing the landscape of technical industries at an exponential rate. Industry’s approach towards regulating compliances, forming rules, and reporting risks are revolutionized through RegTech. RegTech is rightly termed as Regulators or for that matter Reserve Bank of India’s (RBI) new weapon to accelerate financial market reforms in India and control cost in regulatory activities.
Need for RegTech in Indian Scenario
The Financial institutions in India are turning towards novel technology solutions for reducing the burden of regulatory terms, stringent timelines, high complexity, and adhering to regulatory-driven transformations. RegTech provides solutions to banks and other Financial Institutions targeting complex and new regulations, regulatory remediation, and litigations along with the reduction in cost
RegTech can be adhered to as the future of compliance management and reducing regulatory risks in Indian Financial Institutions without overhauling the existing models
RBI’s plan of action
RBI is absolutely prepared to enter the regulatory transformation for promoting reforms through the following areas:
- Liberal financial markets and simple regulations for such markets
- Making Indian financial markets global
- Providing protection to buyer side users
- Safety and resilience to be the priority
In line with these plans and strategy of RBI, RegTech extends support to financial institutions to create and scale solutions rapidly and at comparatively lower risk and cost
Advantages of RegTech
Financial Institutions in India are legal entities that are highly complex, has several business models, risks, and metrics. RegTech supports such institutions for internal control, compliance assessment, accountability and analysis of risk data, procedure management, and effective policies
The different areas for support include:
- Compliance with regulations
- Simplification of management of data and reporting
- Reporting on a real-time basis
- Analysis of data for decision making
- Reframing of regulations as per requirement
- Fraud, risk and security management
- Reduction in time for client onboarding
- Adaption to latest reforms and regulations
- Improvement in data analytics and data collection
When Financial Institutions (FI) combine with RegTech
Financial Institutions combine with RegTech regulatory consulting firms for developing holistic solutions and addressing problems towards disparate compliance teams. FI in India is looking forward to any RegTech that reduces manual effort and creates remarkable addition to data intelligence. The technology solutions should be efficient enough to be approved, understood, and deployed
Some of the partnerships are illustrated below:
- FI –FI
This is a machine learning tool for all kinds of compliance
- FI – Regulator
This is for KYC utility
- FI – Startup
A kind of RegTech Accelerator and Investor
- FI – Vendor
This is a highly cognitive RegTech
- FI – Regulator – Startup
It is a type of distributed ledger for reporting under regulatory
- Startup – Startup
It is an entire comprehensive compliance offering
- Regulator –Startup
This is a Regulator sandbox or Regulator Accelerators
- Regulator – Regulator
This is a perfect collaboration of Home-host regulator
RegTech Trends
To stay ahead in the line of compliance and regulations, RegTech trends can be helpful and assist effectively and efficiently.
Following are some of the RegTech trends identified with respect to the Indian scenario and market:
- Anti Money Laundering
With so many scams and money laundering cases evolving day in day out in India, this trend would be the apt option in Indian markets. Anti Money Laundering aims at monitoring the investment funds and firms that regulate them and also improve the qualification and quality of the employers in the financial sector
- Surveillance and Privacy
With transparency the utmost priority these days, it is becoming tough for the business houses to draw a thin line between requirements of business and privacy while processing data, investigating, and storage. Therefore the need for AI platforms arises to segregate important data from entire communication
- Cross border risk management
With globalization and liberal trade policies cross border transactions have increased tremendously in Indian markets. With this, the risk associated with such transactions, additional regulations, and compliances have also increased.
RegTech assists well in monitoring such transactions and implementing the compliances and regulation framework without any ambiguity
- Banking compliance and tax-efficient investment support
RegTech tools are a boon for banking institutes to comply with regulations such as KYC, AML, trade-based laundering, etc in a better effective, efficient, accurate, and intuitive way
RegTech tools also paves way for essential insight for wealth management by developing profiles for investors, allocating assets, identifying tax rules, and analyzing their impact on the investment strategies adopted.
Conclusion
Data quality, technology, and efficiency are the key areas where the RegTech market seems to shift in 2021. This year of major disruption has made financial markets navigate it by working harder and longer. Now it is time for the industry to improve the working of the compliance department with the highest quality tools which can give better oversight with useful data collection.
