July 17, 2018 11:30
Financial institutions can use the increased burden and costs of compliance in the aftermath of the financial crisis to their advantage, according to a report from the analysis firm risk Brink. The latter maintains that the young shoots in technology working in the field of compliance (regtech) can be used as a competitive advantage to reduce costs of compliance and make the process faster.
“The most direct and the most obvious example of this growth of regulation has been the complexity and, therefore, the cost of compliance. While the number of employees that serves to the customer decreases, the number of people working in roles of control and compliance, which are usually very well paid, has exploded, ” says Oliver Wyman, one of the authors of the study. It is estimated that between 10 and 15 % of employees in the financial services sector are dedicated to the compliance and risk management.
Technology to the rescue
However, the technologies have also been refined over the years, at the same time, where the compliance burden is heavier, what the firm considers to be a ” happy coincidence “. Brink notes the advances in information technology and process automation.
In particular, the company cites the use of automated processes and technologies in recognition of behavior to improve the detection of cases of financial crime, both internal and external, as a way for financial institutions to exploit the regtech to their advantage. Also, biometrics to facilitate the process of analysis of needs (Know Your Client).
Interest and investment growing
The interest in the regtech as investment opportunities is growing. Brink reports data, Fintech Global, which revealed that between 2013 and 2017, five billion dollars have been invested in the businesses of regtech through 585 partnerships and 33 agreements have been signed, totaling $ 533 million, in the first quarter of 2018.
“Five years ago, the overall area of fintech captivated the imagination of investors and boards of directors. But the regtech there were views that as a business niche for solutions for customers rather than as a separate category of investment. The amounts invested mean that the regtech are almost certain to continue to move forward, ” noted the authors of the report.