Juniper Research: RegTech Spending To Reach US $115 Billion by 2023

The transition to cloud-based compliance is a crucial precursor to other Regtech approaches, such as AI or Big Data. Unless businesses effectively plan the correct cloud deployments, they will struggle to utilize the advanced technologies required to meet future compliance challenges.

A new study from Juniper Research has found that spending on Regtech platforms will exceed US$115 billion by 2023, up from an estimated US$18 billion in 2018. The research found that increased regulatory pressures, as demonstrated by the recent GDPR (General Data Protection Regulation) implementation, are driving businesses towards Regtech to meet greater compliance challenges.

According to the research, any heavily regulated business sector not prioritizing Regtech adoption would risk damaging fines from failing to keep pace with regulatory changes.

The report also highlighted that the sharp increase in Regtech spending (an average of 45% per annum between 2018 and 2023) was far higher than that for compliance spend as a whole (17%), reflecting the rapid migration of spend to Regtech from traditional methods.

The research, Regtech: Cost Savings, Technological Impact & Vendor Analysis 2018-2023, found that KYC checks for anti-money laundering are ripe for disruption by AI systems, due to the inefficiency of traditional, paper-based systems.

Juniper forecasts that across banking and property sales, annual gross cost savings from AI introduction for KYC will exceed $700 million by 2023, a nine-fold increase over 2018.

“AI-powered ID solutions are uniquely suited to reducing the resources needed to verify identity. By integrating the correct KYC tools into cloud-based systems, financial institutions can dramatically reduce their compliance burden,” said Research author Nick Maynard.

https://www.enterpriseinnovation.net/article/kyc-and-cloud-will-fuel-us115-billion-global-compliance-spend-2023-1338548699

The Benefit Of RegTech: Trust Building

Smith believes regtech companies like hers provide a less trumpeted but equally important benefit to the industry: trust-building.

“Customer expectation is growing in reaction to what has gone on in the past. People are going to expect far more transparency in their financial dealings with companies. There will come a point where people will expect to have a copy of the conversation they’ve had, and we can do that.”

The pace of change and the bewildering amount of regulation globally is only going to increase. There are 90 regulators worldwide issuing more and more rules, presenting businesses with new challenges on a regular basis.

“The regulatory landscape is changing all the time,” says Anderson. “In the US it’s slowing down, here we’ve just had GDPR, then there’s a lot of complexity on a geopolitical level, and around the corner with Brexit. If you look at a major bank that’s trading in the UK and the EU, there’s a presumed layer of complexity that we might need to adhere to dual or parallel regulation.”

https://www.theguardian.com/legal-horizons/2018/nov/15/the-regtech-boom-how-the-financial-crash-spawned-a-new-industry-in-the-city

This all ensures the demand for the kind of solutions regtechs offer is not going to diminish. In short, this isn’t the last you’ve heard of the regtech boom.

RegTech Association Appoints Seasoned Professionals To Develop The Industry

The RegTech Association (RTA) has announced the appointment of a new CEO and two board members: leading advocacy expert, Deborah Young as CEO; Commonwealth Bank’s (CBA) Head of Governance & Assurance, Jasper Poos as Director and serial RegTech entrepreneur, Harold Lucero as Director.

The RTA brings regulators and regulated entities together to improve efficiency, productivity and safety of business and financial systems - through the adoption of RegTech. These three new appointments will help the RTA deliver on its mission of building higher performing, ethical and compliant businesses through RegTech innovation and investment.

Commenting on the three appointments RTA Chairman, Julian Fenwick said: “We are very pleased to announce these new appointments. We are cognisant of the need to ensure that our board has representation from both RegTechs and Regulated entities, and these new board members provide just that. Our new CEO and board appointments bring together a range of balanced perspectives to help the association accelerate the adoption of RegTech in Australia.”

Deborah Young brings over 20 years of financial services advocacy experience and assumes the role of CEO from her previous position as the General Manager of the RTA. She has a track record in building industry engagement programs from the ground up, including accreditation programs, Environmental Social and Governance (ESG) and diversity initiatives in venture capital/private equity, insurance and superannuation.

Deborah Young said: “It is an honour to be confirmed as the RegTech Association’s first CEO. The growth and awareness of the association’s work continues to build, and I am very excited to be able to lead in the implementation of the next phase of the strategy. We have already begun the roll out of our RegTech AML Boot Camps which underline our values to educate, connect and collaborate. I’d like to thank the board for this opportunity and look forward to working with all members in pursuing our goals.”

RTA Chairman, Julian Fenwick added, “It is especially pleasing to announce Deborah Young as the RegTech Association’s first CEO. Deborah’s passion and expertise in mobilising and operationalising industry-wide impact initiatives made her the clear and logical choice to take the association forward through its next phase. We are excited to work with Deborah and look forward to having her leadership in driving the organisation into the future."

Jasper Poos brings a wealth of global compliance experience both from the regulated entity and regulator perspective. He has been involved in the RegTech Association in an advisory capacity since its foundation in 2017. He is currently Head of Governance and Assurance for CBA in a role that covers operational risk and compliance across the bank’s institutional banking and markets business.

https://www.finextra.com/pressarticle/75536/regtech-association-bolsters-leadership-team

RegTech May Help Implement Heightened Review Measures

Regulatory technology has the potential to continually monitor transactional activity and persons, provide close to real-time insights and raise red flags, and identify aberrations that human beings with their better sense of intuition can then use to follow up. Automated analysis plus human judgment can help a regulated business get a clearer picture of risks facing them and recalibrate immediately — rather than simply taking the remedial action after the enforcement occurs.

Firms should have detection controls in place that alert the compliance department when certain types of trades are being executed, or even better (especially for certain types of trades and for certain traders under heightened supervision), that prevent certain trades from occurring, period.

Prevention is critical, and another key method is through education. Regular training — a form of regtech in itself — should refer to the possible consequences of trading techniques that favor certain investors and fraudulently manipulate outcomes for the firm and for employees themselves, which can be persuasive.

Any brokers that firms believe to be higher risk should be placed into an effective heightened supervision plan, including more frequent contact with the broker, more frequent review of the broker’s communications with customers, and more frequent monitoring or inspection of the broker’s branch office. The same goes for risky clients and vendors, if they are even on-boarded at all.

It is imperative that the firm document all of these heightened review measures.

https://www.reuters.com/article/bc-finreg-regtech-challenges/finras-regtech-report-shows-uses-and-challenges-of-new-technology-idUSKCN1M72F8

The UK Regulators Role in Developing The RegTech Space

A real look inside a bank's compliance office?

The point of regulation is to help protect society from the excesses of the free market. But when done badly, it can be burdensome, create perverse incentives and stifle innovation. Given that the advantages for the economy of having a clean and efficient regulatory environment are manifold, it is unsurprising yet reassuring that the FCA has been increasingly interested in regtech.

‘We started our work three years ago. There was this regtech term being bounded around, but when we first got involved in the market we didn't really know what it meant,’ says Nick Cook, the FCA's Head of RegTech & Advanced Analytics.

He says that now the regulator tries to play three key roles within the developing regtech sector.

The first is as a vocal participant in the market, publishing calls for input and meeting with companies and accelerator programmes to work out the ways in which the technology can be used to meet the needs of regulated firms - this involved a call for input from industry stakeholders in 2015.

The second role is as ‘a convener of new solutions’ through the hosting of tech sprints and sandboxes.

Finally the FCA is an ambassador of regtech through experimentation, research and development of its own. The regulator is piloting a series of tests to develop ‘machine executional reporting’ – in layman’s terms, writing law as code - and also looking at how machine learning technology and natural language processing technology can be implemented in the regulatory process.

'It's pretty fair to say that we, like pretty much every other regulator in the world, are still at an early phase of building this out,’ admits Cook. ‘A lot of it is still in labs and the experimental phase, but we see a myriad of potential use cases.’

This innovative attitude has had huge benefits for the UK’s place in global regtech space.

https://www.managementtoday.co.uk/regtech-changing-banking/future-business/article/1492799

IdentityMind Launches Webstore For Small FinTech Businesses

IdentityMind Global has announced the launch of its IdentityMind Webstore, an online RegTech marketplace that enables firms to integrate regulatory compliance functions directly into their solutions.

The Webstore is self-serve, allowing customers to select a “plugin,” test out a free demo and prepay with a credit card (virtual currencies and other payment methods will soon be available). The store’s plugins are easily customizable, all-inclusive RegTech solutions covering the key anti-money laundering functions (AML): know your customer (KYC), sanctions screening and transaction monitoring.

“In an industry first (demonstrating how IdentityMind continues to drive product and industry innovation), we’re excited to announce that the IdentityMind Webstore is open for business,” said Jose Caldera, chief products officer of IdentityMind, in a press release. “The IdentityMind Webstore is the perfect channel for small and medium-sized [FinTech firms], marketplaces, virtual currency exchanges, small lenders and person-to-person payment (P2P) firms to enhance their platforms.”

The IdentityMind Webstore gives small and medium-sized organizations access to necessary compliance functions that are otherwise expensive and difficult for them to implement.

https://www.pymnts.com/news/regulation/2018/identitymind-webstore-regtech-marketplace-compliance/

FINRA Seeks Comments On It’s RegTech Whitepaper

The Financial Industry Regulatory Authority issued a white page discussing regulatory technology developments in the securities industry, and possible benefits and implications of these developments. Among other things, FINRA noted that regtech developments have significantly impacted firms’ surveillance and monitoring activities and potentially will allow a greater volume and variety of information to be “readily” analyzed. Additionally, regtech startups and incumbents are introducing solutions to enhance customer identification for know-your-customer purposes. These developments could help members’ compliance and anti-money laundering activities. However, FINRA cautioned that the use of enhanced systems could have implications for firms’ supervisory control systems, outsourcing oversight, security, and customer data privacy. FINRA will accept comments on topics raised in its white paper through November 30.

https://www.lexology.com/library/detail.aspx?g=15a03e3f-6f3b-4206-ab60-c6b332af80fa

Apaix, Launches New Tax Product To Help Compliance

Apiax, a Swiss regtech company, has launched a new tax product that allows banks and asset managers to factor the tax impact of financial instruments into their investment recommendations, addressing key challenges in wealth management, such as the need to increase the quality and frequency of client interactions and the rising demand for tailored investment advice.

Ralf Huber, Co-Founder Apiax

“Together with our content partners, we’ve found a way to digitalize tax regulations on the ISIN- level so we know on the level of the financial instrument how it will be taxed in all possible scenarios,” Ralf Huber, co-founder and legal lead of Apiax, told Fintechnews. “Once you have all these variables factored into a regulatory rule set, you can extract tax information from it. More importantly, you can calculate the tax impact of financial instruments and of entire portfolios. We think that’s pretty exciting.”

The solution allows financial institutions to make use of tax calculations in their advisory processes, “the missing piece in the puzzle of value-added, personalized investment advice,” the company said in a blog post. Using the new tool, financial service providers can inform clients about tax-heavy financial instruments and offer them tax-efficient investment recommendations instead, enabling for tailored investment advice as well as new investment products and investment services.

https://insidebitcoins.com/news/swiss-regtech-apiax-on-digital-cross-border-compliance-and-tax-regulations/176514

Cloud Based KYC Will Reduce Firms Compliance Burdens

The transition to cloud-based compliance is a crucial precursor to other Regtech approaches, such as AI or Big Data. Unless businesses effectively plan the correct cloud deployments, they will struggle to utilize the advanced technologies required to meet future compliance challenges.

A new study from Juniper Research has found that spending on Regtech platforms will exceed US$115 billion by 2023, up from an estimated US$18 billion in 2018. The research found that increased regulatory pressures, as demonstrated by the recent GDPR (General Data Protection Regulation) implementation, are driving businesses towards Regtech to meet greater compliance challenges.

According to the research, any heavily regulated business sector not prioritizing Regtech adoption would risk damaging fines from failing to keep pace with regulatory changes.

The report also highlighted that the sharp increase in Regtech spending (an average of 45% per annum between 2018 and 2023) was far higher than that for compliance spend as a whole (17%), reflecting the rapid migration of spend to Regtech from traditional methods.

The research, Regtech: Cost Savings, Technological Impact & Vendor Analysis 2018-2023, found that KYC checks for anti-money laundering are ripe for disruption by AI systems, due to the inefficiency of traditional, paper-based systems.

https://www.enterpriseinnovation.net/article/kyc-and-cloud-will-fuel-us115-billion-global-compliance-spend-2023-1338548699

Bank Of Lithuania Debuts RegTech E-Licensing Feature

Bank of Lithuania announced on Tuesday the launch of its new regtech feature specifically for e-licensing. The feature reportedly makes submission of information necessary to obtain an operating license quicker, easier and less expensive.

“Currently the tool facilitates the process of applying for e-money and payment institution licenses and new enhancements for applications of other license types are under way. The solution should eventually become the main platform for information sharing and cooperation between the Bank of Lithuania and financial market participants.”

While sharing more details about the feature, Vytautas Valvonis, Director of the Supervision Service at the Bank of Lithuania, stated:

“Aiming to create an innovation-friendly, attractive and competitive environment for financial sector regulation, we were among the first in the EU to introduce a RegTech system for submitting applications for operating licenses. We hope that it will further accelerate the authorization process and ease the administrative burden for potential financial market participants.”

Valvonis also reported that given the fast expansion of the financial sector spurred by new market entrants, such as fintech businesses, the number of applications for licenses has increased markedly over the last few years. Seeking to speed up standard procedures and ensure efficient use of supervisory resources, at the same time maintaining the high level of transparency requirements, the Bank of Lithuania is actively implementing various electronic tools, including regtech solutions.

https://www.crowdfundinsider.com/2018/07/135829-bank-of-lithuania-releases-new-regtech-feature-for-e-licensing/

Eventus Launches Website Highlighting RegTech Services

Eventus Systems, Inc., a provider of innovative regtech software solutions for the capital markets, has just launched a new, enhanced website, www.eventussystems.com. The site features a deep dive into the firm's capabilities and market-specific features that have attracted clients to Validus, the company's premier solution for comprehensive surveillance and trading risk management.

Eventus CEO Travis Schwab said: "We're excited to introduce our new site and to provide a more complete view of the range of services, markets served and functionality we deliver. We have grown dramatically in the past two years, and this dynamic new site showcases our increased market penetration, strength across asset classes and depth of product."

Designed by financial services marketing agency Gate 39 Media, the new website highlights the capabilities of Validus, available as an on-premise enterprise or cloud-based solution. Among the features are sophisticated alerting and visualization; a suite of tools for advanced reporting; delivery of reconciled, multi-party counterparty data; monitoring of key trading functions; and the ability to scale the platform across asset classes and connect into existing systems to meet client needs. The site provides examples of more than 150 unique pre-built procedures clients can use for compliance, surveillance and risk management.

The site also includes information on more than 50 technology integrations with Validus, noting Eventus' ability to quickly add new connections and integration points in multiple asset classes. These "out-of-the-box" connections dramatically reduce implementation time, in addition to diminishing the demands on already strained internal resources, Schwab said. https://www.prnewswire.com/news-releases/eventus-systems-launches-new-website-highlighting-regtech-solutions-for-capital-markets-300681001.html

Securrency Partners With SharesPost

Securrency, a regtech firm that has created platform designed to streamline regulatory compliance for token offerings, announced on Friday it has formed a strategic partnership with SharesPost, a provider of private company liquidity solutions and private capital markets research, to help drive tokenized securities trading to the SharesPost platform by providing liquidity through SharesPost’s Alternative Trading Platform (ATS). While sharing more details about the partnership, Dan Doney, CEO of Securrency, stated:

“Enabling the issuance of securitized tokens can be complex, especially when it comes to maintaining compliance with regulations in multiple jurisdictions. We’re thrilled to be working together with the innovative team at SharesPost’s Alternative Trading Platform as our technologies deliver essential security and compliance features to support primary offerings and secondary-market trading of tokenized securities across SharesPost’s impressive range of services.”

Securrency reported that the latest partnership continues its “network effect” strategy of partnering with other companies and financial services providers to deliver best-in-breed security and compliance. It was reported:

“Securrency offers a unique Compliance Aware Token that has compliance and transactional rules embedded in a compliance layer to facilitate securities offerings on virtually any distributed ledger or legacy platform. This sophisticated yet user-friendly approach is much more flexible, powerful, and secure than alternative ‘white list’ approaches. In addition, Securrency’s Know Your Wallet™ tools can detect money laundering and other illegal activity, thereby minimizing the risk of bad actor participation in the distribution and trading of tokenized securities.” https://www.crowdfundinsider.com/2018/07/136440-regtech-securrency-announces-partnership-with-sharespost/

RegTech Firm Exiger Receives $80 Million Investment

Regulation technology (regtech) and compliance services provider Exiger has announced it has received an $80 million investment from private equity firm Carrick Capital Partners, who will become a minority shareholder in the company. The investment is the first outside infusion of capital for Exiger, and it comes at a time when the regtech market is increasingly being eyed for investment.

Michael Beber, Exiger’s CEO and president, noted that the investment will be put towards building out the company’s product offerings, which currently include three core platforms: Insights 3PM, Risk360, and DDIQ. The DDIQ platform was acquired as part of Exiger’s purchase of OutsideIQ in April 2017.

“Our focus is really on enhancing and accelerating the sales of our existing products, which may mean adding new product opportunities that align with what we are doing already,” Beber said.

Indeed, being able to acquire more tech companies and their products was a main motivation for why Exiger, which has been self-funded up until now, agreed to bring in external investment.

“While we have been able to make smaller acquisitions… given our size, in order to make acquisitions that move the needle, they need to be somewhat larger,” Beber said.

As of yet, there are no concrete acquisition plans. But Jim Madden, CEO and co-founder of Carrick Capital Partners, said his firm “expects very rapid growth from Exiger” in the years to come. He added that Carrick decided to invest in the company because of Exiger’s ability to marry “deep subject matter expertise plus technology, and we think that is a unique combination.” https://www.law.com/legaltechnews/2018/07/17/exiger-receives-80-million-minority-investment-in-bid-to-expand-regtech-offerings/

Singapore and India Leading in Asian RegTech

Singapore is leading the Asian regtech space and hosts numerous regtech players such as Datarama, which provides a risk management platform to make compliance-driven due diligence more efficient and affordable. Singapore-incorporated Otonomos uses blockchain technology to change how companies are incorporated, administered, and funded. Separately, the Singapore Exchange (SGX) recently launched a “Members’ Surveillance Dashboard,” which allows data related to market misconduct to be reported, including details of alerts from SGX’s own surveillance system.

Citibank, OCBC and DBS have recently launched chatbots in Singapore. Citibank and DBS each have a chatbot on their Facebook pages that answers customer inquiries, and OCBC has two chatbots—one that does home loans and another for internal human resource purposes.

India is catching up, too. Bangalore-based Signzy, for example, provides an online contracting solution that uses technology, including biometric signature and blockchain, to complete the entire online digital trust system. The India FinTech Forum is currently running an annual competition to recognize emerging fintech innovations in the Indian ecosystem, and a shortlist of 20 fintechs have been chosen to pitch. https://www.brinknews.com/asia/the-evolving-regtech-landscape-in-asia/

SupTech: The Next Generation of RegTech

Citing the Monetary Authority of Singapore, Ms Amphornphan said the next generation of regtech is supervisory technology (suptech), which helps regulators better monitor businesses. This suptech facilitates data digitisation, operational procedures and regulatory process automation. Suptech covers real-time compliance supervision, financial centre development, consumer complaint oversight, feedback collection.

https://www.bangkokpost.com/business/news/1470257/regtech-to-get-push-of-data-privacy-compliance.

Innovation and Disruption With RegTech

While a number of startups have made significant headway, some of the largest firms are spending more money on compliance.

“It’s no secret that we’re heavily regulated,” Nadreau said, adding that his firm’s spend on compliance has increased as a percentage each year. “Any technology that we can use to ease the regulatory burden on advisors and make our lives easier is a good thing.” Wells Fargo has about 15,000 advisors on its network, according to the firm.

“We’re going to see additional disruption in regtech,” said Vijay Sankaran, chief information officer of TD Ameritrade. “Startups will continue to emerge and large companies will pollinate and incubate new ideas from within.”

Being wary of trusting your firm’s data to the cloud is a thing of the past, the panelists said.

“At this point it’s completely table stakes,” Khentov says. “You really think your firm can outgun AWS. It’s not a real issue that the cloud is less secure than servers hosted internally. Everything is a risk, but I’d rather leave it to the experts.” https://www.financial-planning.com/news/finra-panel-talks-technology-fintech-regtech-ai-amazon