RegTech Basics: Things SMEs And Investors Should Know

For SMEs and investors, being an early adopter has plenty of advantages. This is also the reason why you should learn RegTech basics and how it can benefit your business.

If you haven’t noticed already, we currently reside in a digital universe. Technology is ubiquitous in the world around us. For this very reason, SMEs, startups, and investors need to be updated with the current trends. This is why one of the best things businesses should learn about right now is Regtech basics!

Although RegTech is a fairly new concept, it can be the competitive edge SMEs need. Getting familiar with RegTech basics is just the start because when you understand the benefits, you’ll be delving much deeper!

What is RegTech?

RegTech, or Regulatory Technology, is the application of emerging technology to improve the way businesses manage regulatory compliance. Companies invest in RegTech as a way to save time and money.

RegTech harnesses the capabilities enabled by new technologies such as cloud computing, big data, and blockchain. It then devises solutions to help companies across all sectors of activity comply with regulatory requirements.

In the financial sector, RegTech is deemed as a subarea of what is generically known as FinTech (financial technology). According to RegTech Analyst, in 2015 there were 149 RegTech investment deals across the world, totalling $1.1 billion. Just four years later those numbers had jumped up to 317 deals totalling $8.5 billion.

What are the RegTech categories?

In general, there are four categories of RegTech:

1. Regulatory monitoring

These are tools that consolidate documents published by regulators such as laws, enforcement actions, guidance, and rule updates into one platform. These tools are usually in the form of a content library, feed, or resource centre. This makes research and horizon scanning more efficient.


2. Regulatory obligations

This takes the raw text of regulatory documents and transforms them into solutions of actionable knowledge, such as the specific obligations that a firm must comply with.


3. Compliance management

This is the technology that allows users to track and manage their compliance efforts. They contain all of a firm’s regulatory information including their regulatory obligations, controls, policies, and procedures. The tools are usually in the form of GRC platforms and other workflow systems,

4. Execution of compliance

This is where firms implement additional point solutions to execute a task in a compliant way. They can also use it to assess compliance with an obligation or control.


What are RegTech benefits?

Regtech basics are incomplete without learning about the benefits of RegTech. For SMEs, this what you get:

1. Greater internal alignment

With RegTech, you get greater transparency throughout the business. There will also be a stronger culture of compliance as better insights between business units can be shared faster.

2. Improved risk management

Many RegTech tools monitors systems and alert personnel to suspicious activity. This helps protect against various types of risk, including market abuse, cyber attacks, and fraud.

3. Efficiency gains

With RegTech, your firm is capable of processing a high volume of data at incredible speeds. Furthermore, you can also quickly parse and analyze raw legal text and thereafter, extract valuable insights.

4. Greater accuracy and comprehensiveness

Implementing the right technology shores up gaps in the compliance operation. These gaps often lead to human error and increased exposure. The end result of implementing RegTech is a streamlined compliance process.


Is the banking industry onboard with RegTech?

Banks are already using technological tools to meet regulatory requirements. However, RegTech builds on these new technologies.

RegTech solutions improve information responsiveness, flexibility, availability, and accuracy levels. The entire ecosystem is growing so rapidly that the banking industry will also adopt technologies that rely on RegTech solutions sooner than later.

Bank customers are likely to see direct benefits linked to improvements in customer identity management and fraud control, especially in connection with payment methods. Subsequently, RegTech will enable enhanced oversight capability for regulators.


Want to invest in local SMEs that you personally care about?

Want to help local SMEs adopt RegTech? Then why not invest in them!

SmartFunding is a FinTech company that connects Investors and Borrowers. Investors on our platform can earn attractive returns while supporting local SMEs that they truly care about. The benefits we offer to our investors include:

  • Investment opportunities with less risk
  • User-friendly online investment platform
  • Meticulous credit risk management
  • Investor protection

Want to find out more? Visit our website here!

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