The rise of RegTech: are you telling the right story?
Kevin Claypoole-McCloskeyManaging Director
From blockchain to open APIs, financial technology is evolving at breakneck speed. Yet few marketing professionals have time to stop and evaluate the impact that new technologies will have on them, their role, and the brand stories they tell.
With that in mind, here’s our quick guide to RegTech – one of the hottest financial technology and compliance buzzwords of 2017.
What is RegTech?
The widely accepted definition of RegTech is that it is a subset of FinTech which focuses on technologies that facilitate the fulfilment of regulatory requirements in a smarter way than current systems or capabilities. RegTech comes in many forms, ranging from blockchain to machine learning.
It’s ultimately about reducing the cost and burden of regulatory compliance for financial institutions (and corporates). It can also make their processes around complying with regulations much more efficient, which is good news for everyone.
What can it do?
According to the Institute of International Finance, RegTech has the potential to help in areas such as:
- Gathering and aggregating risk data
- Modelling data for stress testing
- Monitoring payments transactions for money laundering or terrorism financing
- Improving KYC (know your customer) processes
- Monitoring culture and behaviour within financial institutions
- Automating regulatory tasks around financial markets trading, such as margin calculation
- Identifying new financial regulations and assessing how they apply to the organisation
Why do marketers need to care?
While none of this will impact financial services marketers directly, it will have indirect impacts. Firstly, corporate and institutional customers now expect their banks to be finding new ways to make regulation less of a headache for everyone – and less of a cost.
What’s more, they want to hear about what their banks are doing to achieve this, so there is a clear need for better communication here; whether it be around bought-in RegTech solutions or bank-led innovations. And the bank’s own journey towards smarter regulatory compliance, and how this is improving the customer experience, will make for a very powerful brand story.
Secondly, when the largest financial institutions are spending over $1bn each year on regulatory processes, RegTech has the potential to save the financial industry a significant amount of time and money. However, the benefits of RegTech must be carefully and sensitively explained against a backdrop of job cuts in the industry.
Thankfully, in the case of RegTech, it is likely that human resources will simply be deployed to more value-added tasks, rather than side-lined – but it is still an important part of the narrative to consider.
Finally, as much as RegTech solutions have an ongoing cost associated with them, perhaps the significant savings they present for the industry are a good incentive for banks to consider redeploying some of those freed up financial resources towards marketing.
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