Over the past decade, financial regulators worldwide have created a huge number of new regulations that financial institutions must follow.  

In 2019, Thomson Reuters Regulatory Intelligence’s “2020 Cost of Compliance” survey captured “56,624 regulatory alerts from more than 1,000 regulatory bodies, averaging 217 updates a day.”  

This means that both regulators and institutions must store, process, and manage large quantities of data. Additionally, poor quality or delayed reporting data can adversely impact regulators’ ability to monitor regulated entities effectively. 

This is a growing challenge, but newer technologies like AI, machine learning, granular data and cloud are helping to solve that at a lower cost. 

The technology that helps financial institutions with this challenge is known as Regulatory Technology or RegTech, while the technology that helps bodies like supervisory authorities manage their financial supervision is known as Supervisory Technology or SupTech

As regulators and financial institutions embrace technology to help them achieve their goals, aligning the technology and software they use is the most efficient path forward for all parties. Here are three ways that RegTech and SupTech alignment are a perfect match.  

1. Significant cost savings and efficient use of resources 

Disjointed technologies and manual processes are deeply inefficient. When financial regulators and the institutions they oversee use systems that are fully aligned, both will see cost reductions.  

Cost savings are achieved in several ways; by eliminating duplication of effort, implementing new regulations is much more straightforward and reducing the cost of fines associated with late or erroneous submissions, which can be significant.  

A frictionless relationship between the regulators and the regulated replaces slow, outdated, and expensive processes. RegTech and SupTech solutions ensure that employees working in these areas spend their time working on more valuable activities and have access to the most timely and accurate data. The range of powerful tools available facilitates rapid deployment of new data collections at a reduced cost. 

Through 2021, the phenomenal growth in the volume of data that financial regulators collect will continue. The accelerating rate of change worldwide is resulting in emerging trends including greater adoption of AI, machine learning, and evolved regulatory data management approaches such as granular data. The Covid-19 pandemic has resulted in a greater emphasis on and investment in digital transformation.  

2. Reduction of regulatory risks 

A seamless flow of data is critical to ensuring both the regulators and the regulated have access to timely information, updates, and insights. When both regulators and institutions are aligned, the interpretation of regulations is clearer. This leads to a greater likelihood of first-time right data and the overall data quality is improved, leading to fewer errors and reducing risk.  

Working off shared technology, it is more efficient for financial institutions to provide ad-hoc data requests. All parties are operating under a shared understanding. When processes are updated, this keeps RegTech and SupTech rules automatically in sync, so financial institutions are always using the very latest ruleset.

3. Empowering financial institutions and enabling innovation in regulatory reporting 

In the past, the level of manpower required to manage compliance meant that only large financial institutions could afford to engage with the regulators through regulatory reporting technology. This squeezed out small and medium-sized financial firms with smaller staffs and lower budgets, leaving them to rely on manual processes. 
 
Aligning RegTech and SupTech offers smaller businesses the chance to compete in the financial services sector, by creating a cost-effective way for them to engage with regulators and meet their regulatory requirements. 

The alignment enables innovation at all levels by looking at compliance from a new perspective. Instead of seeing compliance as a cost and a burden, the insights that the data provides may be seen as a valuable commodity, inspiring the creation of new solutions. 

When RegTech and SupTech work together, the result is beneficial to both regulators and financial institutions. The power of the data they hold can be fully realised, while cost-efficiencies are achieved, and the manual effort involved is reduced. 

Are you interested in how RegTech can help your business? Book a demo today. 

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