Regtech – information technology solutions that focus on regulatory change management – continues to grow into a dominant force in the world of banking. Regtech is now being covered by mainstream media outlets such as the Guardian and Business Insider, because it has become too big to ignore. Let’s take a closer look at Regtech to see what changes it will bring to the industry.
The Two Phases of Regtech Technology Adoption
As Regtech grows, it is important to note that it will grow in different phases, as most technologies do. When a technology is new it is used to solve the problems currently being faced. Instead of recreating the whole business process, the technology is inserted in existing business processes to make it faster. We saw this happen with information technology. Businesses started using IT for accounting and backend work, but business processes largely remained the same. The only thing that changed was the speed and efficiency of the processes.
Then we entered the second phase of information technology – where businesses started fully exploiting information technology by disrupting business process with new ideas and strategies. Most of the digital business models we have now were simply not possibly without information technology. Businesses like Uber, Netflix, Spotify, and Airbnb were ‘’born-digital’’, which places them into the second phase of IT.
We are in the First Phase of Regulatory Change Management Technology
The changes we will see within the next few years will be in speed and efficiency, because we are still in the first phase of Regtech. This can be observed by looking at how businesses are using Regtech products. Most of them are using them as tools to empower the regulatory change management processes within the organization. Regtech tools are being used to monitor regulatory changes and notify stakeholders whenever there is a relevant change which they need to be aware of. These tools are also being used to compare regulations to quickly find out what has changed.
This clearly puts it in the first phase. Banking will not drastically change because of Regtech in the next 2-3 years. It will become faster and better but the same business processes will be common across the industry. The real change starts once Regtech becomes ubiquitous and businesses start thinking about using its full potential.
The 2nd Phase of Regtech will be a Game Changer
What can we expect in the 2nd phase of regulatory change management technology? We already have an idea of where things are going. Multiple governments are now considering releasing future regulatory updates in machine language. The regulatory change management solutions we have right now use natural language processing to parse regulatory updates and integrate them into the existing regulatory change management framework. Businesses keep opting for Regtech technology and soon most businesses will be managing regulatory change through automation.
In such an environment it makes sense to directly release regulations for machines. There will be no need to translate regulations into machine readable code, as it will already be machine readable code. This will increase efficiency and accuracy across the board and will allow businesses to adapt to changes faster. Such automation will enable new banking processes that are impossible within our existing technological framework. We currently need human intervention in risk and compliance, but we will not in the near future. Opening a bank account may become as easy as creating an account on an app on your phone.
Regulatory change management software, along with compliance and risk management technology, will change banking as we know it in a decade. Banking has many processes that are very slow because banks want to be diligent. Every bank wants to deliver quick services, but they also want to ensure that they are doing everything by the book. Regtech solves this problem, as it makes doing things by the book instantaneous. Banks of the future will offer services and products that are simply not possible in our current banking sector.
About the Company
360factors, Inc. (Austin, TX) helps companies improve business performance by reducing risk and ensuring compliance. Predict360, its flagship software product, vertically integrates regulations and requirements, policies and procedures management, risks and controls, audit management and inspections, and on-line training and qualifications, in a single cloud-based platform based on artificial intelligence.