RegTech: Leveraging on Technology for Efficient Regulatory Compliance

On November 27, B-Hive brought together different stakeholders from its community for an introductory workshop on RegTech. The two-hour interactive session tackled the key regulatory challenges of traditional financial institutions and inspired an open discussion on how new technologies such as AI and distributed ledger technology could be used to drive more efficient regulatory compliance in their organizations.

Independent board member Sally Dewar from JP Morgan kicked off the workshop by highlighting the importance of collaboration in dealing with an ever-changing regulatory landscape.

Consulting partner Baker McKenzie further built on this by introducing the key challenge of today: “How will financial services players meet enhanced regulatory expectations in an environment of sustained cost pressure?” As every firm is operating in a highly cost-cutting environment, it becomes ever more important to leverage on the innovations of regtech firms.

Matt Elton (CEO Finnolux and Vice-Chairman of the International RegTech Association) highlighted key regtech trends all over the world. For example: Canada is heavily focused on the use of AI to drive regulatory compliance, while Mexico is collaborating with multiple stakeholders to develop a fintech regulatory framework. This implies that regtech is interpreted differently around the world and it is up to the local players to define what regtech means for them, within their existing regulatory landscape.

In an attempt to define what RegTech means for B-Hive, the participants were invited to reflect on significant regulatory challenges within their organizations. During the workshop, a number of common challenges were brought up:

  • Growing mandatory reporting regulations

Not only is the existing regulation in Europe too complex, the industry is anticipating upcoming regulations such as PSD2, MiFID II and GDPR in 2018. The challenge lies in how to comply with reporting requirements and adapt these with their current compliance processes.

  • Inconsistency of legal document interpretation

Aside from the sheer volume of existing regulation, there is also no consistency in the interpretation of regulation and reporting requirements. It is important to have a system in place to consistently interpret the regulation across different organizations and countries.

  • Redundancy of KYC processes

There are multiple KYC processes across the financial services value chain. This is not only inconvenient for the client, it also is very redundant and inefficient. Moreover, KYC processes are underutilized to-date, as they are not being used to perform extensive consumer behavioral analysis to provide better customer service.

With these challenges in mind, B-Hive defines regtech as “the use of new technologies to address current and future regulatory & compliance requirements more effectively and efficiently.” The next step is to drill these down into tangible use cases that can be tackled collaboratively across B-Hive’s industry partners.