The financial services industry is highly regulated, necessitating compliance with regulatory requirements. In response to the growing demand for compliance, innovative RegTech startups, such as Pichain, have emerged to address these needs. RegTech, short for regulatory technology, refers to the use of technology to streamline regulatory processes and enhance compliance within financial services. As the industry continues to evolve, RegTech is poised to play a significant role in shaping the future of FinTech.
The financial services industry, responsible for managing people’s finances, has experienced a surge in regulatory requirements post the Great Financial Crisis of 2007/2008. This has led to a substantial transformation in compliance services, with increased investment and focus on regulatory oversight.
The Impact of the Financial Crisis
Following the financial crisis, banks faced intensified regulatory scrutiny and a multitude of new regulations and reporting obligations. This resulted in a substantial increase in compliance-related costs and processes for financial institutions across various sectors within the industry.
The Role of Regulatory Technology
RegTech companies offer solutions in areas such as Regulatory Reporting, Risk Management, Identity Management & Control, Compliance, and Transaction Monitoring, utilizing technology to enhance efficiency and automate manual processes. Key focus areas include leveraging artificial intelligence for fraudulent transaction detection and automating KYC processes to facilitate customer onboarding.
Automation is particularly advantageous for repetitive manual tasks, offering speed and reliability, which are crucial in the context of compliance. Many RegTech startups specialize in addressing specific use cases or offer platforms that cater to multiple regulatory challenges.
Moving Forward
Given the enduring importance of banking regulations, financial institutions are expected to continue to grapple with complex compliance requirements. Those relying on conventional manual processes are likely to face challenges and increased costs. Collaborating with innovative RegTech startups to harness technology for addressing regulatory challenges will be pivotal for staying competitive in the industry.
Furthermore, the rise of neobanks and fintechs will also bring forth a similar compliance burden and regulatory scrutiny, underscoring the ongoing relevance and significance of RegTech in the financial services landscape.
