PSD2 and other payment regs are getting away from data compliance tech

After the 2008 financial crisis, FIs faced stringent regulations from governing bodies across the globe. FATCA, GDPR, PSD2, and MiFIDII are some of the regulations that have come into existence in the last few years.

According to a Deloitte report, there are around 200 regulatory revisions to track and comply with on a daily basis. Regulatory bodies around the world will continue to challenge FIs with regulations and amendments in response to fraud, data breaches, procedural lapses, virus intrusions, and other digital disruptions. When FIs enter new markets, it becomes even more challenging to comply with local, regional, and international regulations.

The cost involved in deploying people, process, and technology to ensure compliance is unavoidable. It takes money from FIs’ budgets that could otherwise be used for product innovation, distribution, digital adoption, or many other purposes.

Traditional compliance data handling tools and procedures are mostly not efficient enough to handle the mounting data in the right way, which makes the analysis extremely difficult. In fact, it is resulting in more complex data management, privacy, and other compliance-related issues.

Regtech primarily uses distributed ledger technology such as blockchain for cost-effective, transparent, and quick solutions to improve the KYC process. FIs can share KYC details of the customer on the distributed ledger, and other FIs can refer to that information to onboard the same customer. This, in turn, reduces KYC process time and cost to the FI, hence, results in a better banking experience for customers.

Reporting involves data capture, aggregation, quality checks, and submission. Regtech provides an edge by automating the workflow-leveraging RPA tools to source data from disparate systems, navigate through the workflow, and extract the data in a variety of formats for submission to various regulatory bodies.

Regtech offers real-time transaction monitoring by using artificial intelligence and machine learning on the streamed data to address anti-money laundering and counterterrorist financing regulations.

The technology also offers sophisticated risk models built with machine-learning algorithms. These models can spot complex patterns and predict risk events so that FIs can implement appropriate, timely security measures to mitigate it.

In short, Regtech is not just a buzzword but an agile, fast-emerging lifeline to help FIs understand the regulatory plot better and manage their risks more efficiently. Regulators continually revise regulations to ensure stability in the financial system. It’s time for FIs to embrace the guardian to strike the right balance between compliance, cost, and innovation and to lead effectively in disruptive times.