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Traditional finance sector is changing at a swift pace. Digital life style has dramatically changed the way BFSI (banking, financial services & insurance) companies interact with their consumers; be it retail banking, mortgages, secured & unsecured loans, insurance or other. Technology has been driving this transformation of self-serving, asynchronous, 24x7 consumer interactions with minimal (or no) help at all from the front-desk employees at BFSI consumer facing offices. Meanwhile, financial institutions across the globe- be it public or private sector banks, payments banks, MFIs, NBFCs, and small finance banks among others have to ensure proper compliant processes in place to meet the evolving regulatory framework. In this environment of scrutiny and complexity, compliance and regulatory management through technological interventions have become imperative for enterprises operating in BFSI space. Regulatory Technology, which is known as regtech in industry parlance, therefore, is witnessing wider adoption in recent years across the BFSI industry.

Regtech is a very large universe. It comprises regulatory reporting, risk management, identity management & control, process compliance, and transaction monitoring for banking institutions. Starting from identity verification, client onboarding, KYC (Know Your Customer) & AML (Anti Money Laundering) to regulatory reporting, regtech solutions enable banking institutions to manage governance risks efficiently. Globally, banks are spending billions to manage risk and regulatory-compliance related activities. As per estimates, banks spend around US$270 billion every year on risk and regulatory compliance-related activities globally, out of which US$128 billion per year is being spent on technology. And this trend is likely to rise in coming years.

The banking institutions are likely to produce a large amount of data in the form of banking transactions and customer behavior as more people come under the fold of formal economy in emerging economies like India, and many nations in the African continent. Moreover, digital transactions are on a rise during this pandemic period. For instance, in a country like India, transactions through Unified Payments Interface (UPI) touched an all-time high of Rs 6.50 lakh crore (approximately US$88 billion) in September 2021. Just five years ago, this number was less than US$1 billion (In September 2017, UPI transaction value was around $800 million). Such huge digital transactions call for better, secure applications, infrastructure, processes, and storage of data (and scrutiny thereafter), to thwart attempts of money laundering, fraud detection and prevention.

In this perspective, regtech solutions are coming to the rescue of banks and other financial institutions. These solutions, which are powered by artificial intelligence (AI) and data analytics, not only make the record-keeping process seamless but also raise red flags in case of suspected activities/abnormal pattern. Analyzing financial profile of the customer by obtaining deep insights about customer behavior at a granular level through past transactions becomes easier through these regtech solutions. Deployment of proper regtech solutions enables financial institutions to devise a robust credit risk management system that provides real-time information for the detection of potential risks. This leads to proactive actions, mitigating the risks from the initial discovery to resolution. Most regtech solutions are deployed as SaaS-based applications that are integrated with the existing IT infrastructure of financial institutions. As several compliance-related data sets emerge from core banking operations, these solutions are integrated into core banking platforms of banks and NBFCs for better data extraction and insight.

We at Moringa Techsolv provide CladRysk^® suite of governance solutions to BFSI clients globally. ‘CladRysk^®’ portfolio offers a comprehensive range of solutions catering to areas including audit, compliance & risk management, Anti-Money Laundering & KYC, credit administration, monitoring & Non-Performing Asset Management among others to BFSI space. Powered through various digital technologies, these regtech solutions are easy to use and get seamlessly integrated with existing IT platforms. With plug-and-play features, these solutions provide optimum compliance solutions to banking institutions in a secured manner.

As banks across the world navigate through the complexities of regulatory compliance, SaaS-based regtech solutions provide secured, and cost-effective options to do so at optimum efficiency. However, banking services providers should choose a vendor with experience in deploying such solutions at scale. Banking institutions should also take utmost care to ensure data security through robust authentication features deployed by the IT vendor. Moreover, an internal audit of systems at regular intervals is also a desirable way to gauge risks. With digital banking emerging as the future, the adoption of regtech solutions is a must to mitigate compliance-related risks apart from sound customer engagement.