Regulatory Technology, aka RegTech, is the platform that combines regulations with technology. These are technologies created to facilitate the process of compliance with increasingly complex regulations and to serve users in-process monitoring. Regtech provides to detect points that not comply with regulations and makes these points compatible. Companies are expected to generate both cost-effective and real-time solutions from risk and compliance units. Regtech is a technology to meet the needs of these units.
Each country has its own audit and rules especially in sectors such as banking, finance, communication and energy. There are also institutions that regulate them. The cost of dealing with these regulations is very high. It’s even higher if you don’t comply. In this case, Regtech companies are getting interested. By 2020, regtech companies are expected to create a large market. In global reports, we see the intensity of regtech companies in the United States of America, the UK, and Ireland, but Turkey is not on the list.
What are the main objectives of RegTech?
Regtech is an industry that offers technological solutions to the challenges of companies from the economy and regulations. The main objectives of RegTech include enhancing transparency and consistency and to standardize regulatory processes. Regtech conducts the in-house compliance processes, audits and risk workflows. It ensures compliance with regulations and compliance requirements in real-time. Uses the latest Technologies and RegTech differs from other methods by being cloud-based. Reduces compliance costs. It builds trust for investors.
The Future of Regtech Industry
FinTech industry, the rising star of recent years, brings with it thick legal files. The way to deal with these files is through RegTech solutions. There are many legal imperatives and regulations that not only for FinTech companies but all official businesses have to deal with. Especially in sectors such as banking, finance, communication, energy, each country has its own heavy audits and rules and the institutions that regulate them.
The cost of dealing with this set of rules, consisting of hundreds of pages for many projects and processes, is not so low. For example, London-based HSBC spent $ 2.2 billion in the first 9 months of 2015 solely for regulatory and compliance work. In particular, the costs of financial institutions to comply with legal regulations are growing exponentially each year. This area, which is thought to cost 80 billion dollars globally, is expected to reach 120 billion dollars in the next five years.
If you think this cost is high, you are wrong because the cost of not following the legal requirements is much higher. The amount of fines that only financial institutions in the US have paid in all their global operations for not meeting these requirements is over $ 160 billion. At a time when FinTech is so on the rise, all public enterprises, especially all financial companies, need low-cost and flawless solutions. Right at this point, Regulation Technologies The star of RegTech companies is starting to shine.
In 2020, global legal regulation and management software is expected to create a market of $ 118.7 billion. Approximately 55 percent of this cost will be composed of consultancy and business services.
What are the Relationships Between Regtech and Fintech?
With the development of FinTech innovations around the world, the information network activities of financial institutions have also expanded. As the information networks expand, the security issues to be taken started to increase. Increasing security measure needs were the reason for the establishment of RegTech companies. RegTech aims to integrate data into maximum security by giving importance to agility and speed. In short, while financial technology companies focus on customer experience, Regulatory technology companies enable financial technology companies to meet their legal obligations.
Which industries use RegTech?
At the top of the list is the financial institutions with the highest risk of illegal activity. In addition, high-risk sectors, health, casino, law, insurance, financial services and etc. sectors. Regtech is a need for these sectors.
The Importance of Regtech in Fighting Financial Crimes
With the development of technology, organized crime organizations are developing new crime techniques. Every year, various crimes such as money laundering, terrorism financing, corruption and bribery are committed through financial systems worldwide. In these years when customer experience is very important, financial institutions can protect themselves from financial crimes without harming customer experience thanks to Regtech solutions. Companies can detect financial crimes and meet AML obligations with anti-money laundering software.