IBM RegTech Innovations

Are your compliance levels at floor or ceiling?

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Study shows that RegTech delivers relief from burdensome manual processes – 90% of respondents use or are expanding use of RegTech.

According to Forrester Research, RegTech – regulatory technology – is the fastest growing category they track. At $4.6 billion in funding, the year-over-year growth rate for the first three quarters of 2019 was 103%. A January 2020 Forrester snapshot study sponsored by IBM reveals the drivers, true value and future direction of RegTech implementations. In this blog, professionals involved in risk and compliance at banks and other institutions can find out why such investments are growing so quickly.

First a few methodology highlights of the Forrester study:

  • RegTech is defined as advanced software techniques including artificial intelligence (AI), robotic process automation (RPA) and machine learning (ML).
  • These are used to increase risk and compliance reporting and monitoring effectiveness and efficiency.
  • The interview base was 136 risk and compliance decision makers in the US, in enterprises with over 1,000 employees.

Topline findings are discussed below. For the full study, see “Digital Transformation Accelerates RegTech Usage For Proactive Change Management.”

Reasons and drivers 

Banks and financial institutions are responsive to customer demands to safeguard the massive volumes of private and proprietary data that they collect. The Forrester snapshot report shows that RegTech is highly effective in reducing the labor-intensive tasks of managing and protecting critical data.

This makes sense because best-practice RegTech solutions use ML for processes like automatically tracking and monitoring regulatory compliance and changes or finding hidden patterns by intelligently searching and monitoring immense stores of financial data.

RPA is used to automate highly repetitive, routine tasks normally performed by skilled workers. It can run tasks ten times faster or more and helps eliminate copy-and-paste mistakes from entering the same data into multiple systems.

AI in anti-fraud scenarios helps reduce false positives, pinpoint suspicious transactions and conduct, and predict and model compliance risk. It provides more accurate detection and insights leading to improved decision-making. AI also accelerates and refines creation of new rules and models to stop breaches, money-laundering, KYC issues and novel, emergent types of fraud which appear with new technologies or widespread industry changes.

Before all of that can happen however, industry-leading solutions apply data science in order to identify, access, prep and smooth all the requisite data from its various silos and systems. To optimize RegTech effectiveness, the full lifecycle of data needs to be considered.

Think about compliance like a house – meeting  regulatory compliance is the floor or minimum – but strive to reach the ceiling and improve results.

The RegTech value proposition

A November 2019 Forrester study shows that risk and compliance decision-makers overwhelmingly expect RegTech to provide significant efficiencies in terms of more time to do other things. Companies spend too much time and labor hours to identify, keep up with and manage all their regulatory compliance obligations. As regulation grows and new types of financial crimes appear, banks and financial firms look for a better way.

Risk and compliance professionals also see RegTech as critical to meet all required laws and policies. They need RegTech support to manage risk complexities of fragmented resources and information in different areas across the business. RegTech offers a better way to wrangle and make sense of the many petabytes of complex and variable data.

Study results: Risk and compliance decision-makers agree

  • Efficiencies gained by RegTech implementation would provide compliance and risk experts/team significant time back in their week to focus on other tasks.

94%

  • We see RegTech as critical to meet regulatory requirements by ensuring compliance with all laws and policies required of our business.

92%

  • We need support for connecting and addressing all the risk areas across the separate disciplines in our business.

91%

  • We have implemented or are expanding use of RegTech.

90%

Try to reach best practices

Clearly RegTech technologies are crucial, helping enterprises deal with a shifting regulatory environment, customer demands and the efficiency issues around big data variety, volume and velocity. The Forrester January 2020 snapshot study advises companies to realize that meeting minimum compliance level is not enough. Try to reach higher for best practices through techniques like change management to successfully adopt and implement RegTech.

Technical, regulatory and industry changes won’t stop. But properly applied RegTech solutions can keep data protected, mitigate risks and reduce intense burdens of audits and requirements. Visit ibm.co/2Tl2T1d to request the study.

Written by: John Kelly, IBM RegTech

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