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The Defining 2020 Reg Tech Trends You Need To Know
1 year ago by Antoun Massaad

The Defining 2020 Reg Tech Trends You Need To Know

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In the last few years, the financial sector has seen increased regulations regarding financial crime, security, and privacy. With laws cracking down and increased penalties, institutions can no longer afford to disregard compliance.

During this time, many are turning to artificial intelligence because AI can offer automated data collection that is instantaneously interpreted for potential threats, which is key to allowing companies to remain compliant. 

The next stage of this is Regtech which is short for regulatory technology; it harnesses technology to automate and make compliance a more straightforward and more effortless task. In 2020 and beyond expect to see the Regtech industry go through some changes that will further establish it as the go-to solution for regulatory compliance. 

Below are what we believe will be the biggest Regtech trends for the upcoming years.

Regtech Trends We Saw in 2019

Before we look at the upcoming trends lets briefly look at the changes that have already occurred in the world of RegTech that will continue playing a key role in its future. 

1. Regtech Has Evolved Past the Conception Stage 

In 2019 Regtech was able to move past the pilot and innovation stage into production and implementation. Regtech is no longer only for early adopters - all companies have begun to adopt and see results from Regtech solutions.

2. Survival of the fittest

The innovation stage in 2019 has weeded out the weak from the strong leaving behind only those that were able to understand and create real value for the market. With only the powerful left behind financial institutions can be confident that the solution they select will be one that can provide value to their companies.  

3. Regulators Gave Their Approval  

Last year regulators gave their approval when they began to ask firms to adopt Regtech solutions actively. This endorsement from regulators was a massive accomplishment for the industry as it cemented Regtech as a viable solution opening the door for the industry to move forward.

4. Pressure for Compliance Reached A New High

In 2019 we saw authorities take more enforcement actions and give out higher fines which put more strain on Risk and Compliance teams. Not surprisingly, this is a trend we expect to continue in 2020.

5. Further Globalisation of The Marketplace

Since businesses continue to cross and operate into new marketplaces, we expect to see regulations to do the same, which means that companies operating in multiple jurisdictions will have to contend with more rules to meet compliance requirements. Again, this is something that will likely continue in the future.  

Regtech Trends in 2020 and Beyond

RegTech gets more digitised

As authorities introduce new regulations and amendments, both regulators and organisations will struggle to interpret all the rules which they must comply with. However, since governing bodies also had a difficult time deciphering these complex rules, the future will likely focus on simplifying these policies to ensure understanding and implementation. 

Therefore, in 2020 we expect to see regulators begin to use Regtech to digitalise and decode these extensive regulations. 

With Regtech’s superior capabilities governments can assess case-specific risks and create world-wide databases that users can access at multiple points for instance when entering a new business relationship. 

We believe that this capability, combined with the low costs that Regtech provides and its heightened ability to facilitate compliance, will lead regulators to mass-adopt Regtech as the solution to simplifying regulations.

Unscrambling Cross-Border Risk Management

As we mentioned earlier globalisation continues to expand markets allowing companies to operate in multiple jurisdictions. However, regulation standards often vary and therefore, countries will also vary on how strictly they enforce rules, including how they prosecute policies on a local and national level.

All of this often makes it difficult for companies to interpret and prioritise guidelines creating confusion as to how to follow them correctly to ensure compliance. This confusion has caused regulatory risk associated with cross-border transactions to rise, including the cost and burden of managing these risks.

This is where Regtech will continue to provide a solution beyond 2020 that simplifies regulation and makes balancing laws from multiple territories more effortless. How? With its ability to uncomplicate vague and complex explanations due to its built-in interface that observes cross-border business operations and automatically implements compliance frameworks. 

With this technology, compliance is essentially built-in as cross-border based transactions are automatically monitored due to the built-in digital guidelines of the industry as well as machine-readable rules that give it instructions on how to remain compliant. 

Built-in Digitised Procedures

Another trend you can expect to see in the future is an effort by all businesses to redesign their operations so they can include compliance within their procedures. As we mentioned earlier risk and compliance teams are facing increased pressures for conformity so they must find new solutions to ease the burden.

In 2020 Regtech will continue to enable financial institutions to digitise many of their compliance processes and remove the inefficiencies, delays, and excess paperwork that is typically a substantial part of compliance. By continuing to ‘bake’ in compliance procedures such as Risk Tolerance, IPS, and KYC into a digital workflow, companies can reduce costs (penalties), time, and labour needed to manually complete and monitor compliance. 

Furthermore, they can maintain their focus and resources on customer experience, which means they will be able to cultivate stronger relationships with clients as well as develop customer loyalty. 

Regtech Ensuring Focus Remains on Following Compliance Protocols

It has been two years since the MiFID II reporting regime has gone live. Therefore, the firms that faced penalties under that regime had plenty of time to apply the changes required to comply with the new MiFID II policies.

For 2020 and beyond firms will have to maintain their focus on how they implement and monitor compliance procedures so that they can ensure:

  • That they can correct past mistakes and known errors
  • They can track reporting performance 
  • That there are data analytics controls in place
And because regulators will always raise concerns regarding data quality and other recurring themes, it would in the best interest of firms to apply controls that address these issues before regulators force them to through new laws. Tools such as Regtech will be key in addressing  both incidents discussed above as it is an easy, efficient, and cost-effective way to ensure continued compliance and the prompt fixing of any new issues. 

For more information on how we can help, give us a call today on +357 25 346630 or visit www.cedar-rose.com

  • Reg Tech
  • Regulatory Compliance
  • Financial Institutions