The power of regtech | KPMG | MU

The transformative power of regtech

The power of regtech

In today’s fragile business environment, companies are struggling to manage their regulatory burden while reducing costs. To address these disparate goals, companies are turning to regulatory technology (regtech).

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Over the past eight years, new regulations have driven compliance costs up, making it critical for companies to find more powerful software solutions in order to remain cost effective and compliant. Enter regtech: innovative technologies that can provide agile solutions to ever changing regulatory requirements while also helping companies achieve other outcomes – such as improving customer service, developing new offerings or achieving greater competitive differentiation.

Making the most of business data

As the availability of customer, financial and operational data continues to proliferate, many financial services companies have been challenged to assess the wealth of 'big data' at their fingertips and draw meaningful and actionable conclusions. At the same time, companies are also under pressure to protect their data – to manage risks associated with cyber-attacks, non-compliance with regulatory obligations, and the impact of human bias in data management.

Regtech solutions take a different approach, leveraging technologies like cognitive computing and machine learning to focus on 'smart data' as a more effective way to structure and find meaningful patterns. By focusing on smart data, companies can gain better insights into regulatory practices, automate complex reporting, conduct meaningful analyses of critical compliance risk areas, and create an end-to-end view of compliance, reporting and data. Once implemented, companies can also use cognitive regtech solutions to unlock other data for operational purposes – such as to provide more detailed and effective customer and counterparty credit analyses and underwriting of small business loans.

Supporting innovation

Regtech firms, regulators and companies in the financial services sector are also looking to regtech as a means to drive regulatory innovation, including regulatory compliance transformation, automation of complex reporting, risk monitoring and analytics, and automation of risk management. Similar to data management outcomes, however, such technologies can also be used to help support back-office transformation, deliver improved customer service experience, advance new product development, and more.

Maximizing investment value

Given the widespread applicability of regtech solutions, companies can apply the costs of implementation and maintenance against not only regulatory outcomes and risk reduction, but also against the other benefits in order to drive more value and a stronger business case for change.

Where to start with regtech

As with any technology implementation, companies need to have a concrete strategy and plan for moving forward in order to achieve the best value from regtech. As a starting point, consider the following activities:

  1. Assess current state. Review the legacy, current and emerging technologies already in use and understand any limitations.
  2. Understand your options. Consider whether to build, buy or partner with an external regtech or fintech provider in order to meet specified needs. Recognize that options may change rapidly as regtech continues to evolve.
  3. Identify immediate wins. Identify whether you can integrate existing regtech solutions into your current systems in order to achieve immediate wins (i.e. target specific challenges or pain points in your value chain) while working on long-term solutions.
  4. Assess and address additional risk factors. Review regtech risk factors, such as data- and cyber-security measures and algorithmic biases, in addition to risks associated with the change process itself. Embed risk and compliance frameworks in the design phase of regtech initiatives, and evaluate their effectiveness on an ongoing basis.

For a deeper dive into the transformative power of regtech, including the perspectives of key subject matter experts, read our latest edition of Frontiers in Finance.

© 2017 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.

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