Managing compliance and meeting regulatory requirements is becoming increasingly expensive for businesses across a wide range of industries. Regulatory bodies are not only requiring businesses to do more, but they are also increasing the penalties for noncompliance.
What Is RegTech?
RegTech is a fast-growing industry that helps businesses achieve compliance more effectively and more efficiently.
Although the technology to aid in regulatory compliance has been around for years, recent advances in Artificial Intelligence (AI) and Big Data have significantly improved its capabilities.
RegTech firms are varied by the different industries they serve and the regulations that govern them, with many specialist companies serving a particular industry or solving a specific problem. They cover areas such as:
- Background Checks – Assisting businesses with regulations that concern identity verification. This is essential for a wide range of industries, including healthcare and education.
- General Compliance – Providing a framework and tools to assist with the implementation of a general compliance program. These may work alongside more specialized tools to provide complete coverage.
- Healthcare – Helping businesses in the healthcare industry comply with requirements for protecting patient information.
- IT Security – Keeping businesses in compliance with information security requirements by detecting and protecting against policy violations.
- Product Quality – Covering regulations that protect the safety of consumers by ensuring products meet quality standards.
How Fast Is the RegTech Industry Growing?
CBInsights reports that RegTech startups have raised $2.99 billion in funding since 2012, with 2016 marking a new high of 102 deals.
According to The FinTech Times, investments in RegTech companies have seen a 38.5-percent compound annual growth rate over the last few years and have a positive outlook for the future.
How Will RegTech Transform Compliance?
RegTech provides a variety of benefits to businesses that use it effectively:
1. Automating Compliance
The automation of many simple yet time-consuming compliance tasks can save businesses both time and money. For example, a business may purchase software that allows it to track potential issues in real time and detect noncompliance.
Not only will AI do this quicker than a human, but it will do it more accurately. By automating these tasks, businesses can free up both staff and capital to add value in other areas.
2. Increased Clarity and Insight
RegTech increases clarity by providing businesses with a complete overview of compliance progress. Requirements are clearly documented, and tasks are clearly tracked. As regulatory requirements are growing more complicated, software made to manage the process will become more essential.
Additionally, RegTech can help create value by giving insight into both the process and the data tracked. This information can be used to further improve the business’s compliance processes and deliver more general business benefits.
3. Moving to the Cloud
Unlike traditional tools used to help manage compliance, RegTech software is predominantly cloud-based. This provides businesses with several benefits:
- Scalable Performance – Businesses can use more or less computing power as they need it, providing flexibility ideal for rapidly growing companies or seasonable demand.
- Cost-Effectiveness – You pay only for what you use. Most Software-as-a-Service (SAAS) applications provide a sliding fee scale, allowing smaller businesses to access the same great tools that enterprises do.
- Outsourced Security – Because a third party holds your data, it is responsible for its security. RegTech firms typically offer the highest level of encryption and security available. This is one less thing for your business to worry about and frees up more resources to focus on staying compliant.