RegTech in financial services

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Financial institutions have been making limited headway in cutting the cost of complying with increasing post-crisis regulation. That may be changing.

RegTech startups use emerging technology to help firms address risk and regulatory challenges. From speeding loan origination to sharpening surveillance against fraud, money laundering, and insider trading, financial institutions now look to RegTech to improve efficiency and lower risks.

The road ahead

Gathering speed. We expect RegTech adoption to continue to accelerate. Look for continued interest in areas such as financial crime surveillance (identifying bad actors), consumer compliance, scenario modeling, and enterprise risk management. Regulators see the technology’s potential to reduce systemic risk and improve financial stability. And while they’re unlikely to endorse specific technologies or common standards, look for them to allow firms to test and learn, and then assess how RegTech is being used.

Huddle up. We anticipate consolidation of and new partnerships among RegTech companies. Financial industry buyers generally want integrated offerings with advanced customer support, but most RegTech startups currently offer narrowly focused solutions.

Regulators on the bandwagon. We expect financial regulators to expand their own use of RegTech. Emerging technologies like robotic process automation can help agencies process filings more efficiently. Artificial intelligence can be used to help identify misconduct and insider trading. This is especially important given the obvious resource constraints.

What to consider

Pilot, pilot, pilot. It’s tempting to direct your compliance team to just “plug in” a RegTech solution. Don’t. Instead, explore a few spots where you think RegTech will pay off, can be deployed quickly, and where new risks are unlikely. Choose a specific use case to address. One area to consider? Technology that improves workflow in regulatory reporting.

Know the roadblocks. Many issues can derail a RegTech integration, whether it’s outdated technology, uncertainty over alignment with existing regulations, or passive resistance from staff. Your team working on a corrective action plan with a tight deadline, for example, won’t be open to conversations about process enhancements. Be aware of the resistance and obstacles you’ll face, create an open dialogue, and work toward a common goal.

Act, don’t react. Financial firms are finally finding room to breathe after a decade of new regulations, but don’t expect the break to last. From the top down, pressure is building to deliver cost savings and reduce risks further by using technology. Executives also expect that insights gathered from compliance will help other areas of the business, and this requires a completely different mindset. Use RegTech strategically. It can address these needs and others.

“RegTech isn’t just adding technology to existing processes. It can change the way you think about regulatory compliance. Once you understand its transformative potential, you may find ways to create a competitive advantage.”

- David Choi, US RegTech Leader

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How PwC can help

Our teams in asset and wealth managementbanking and capital markets, and insurance are helping our clients tackle the biggest issues facing the financial services industry. With professionals across taxassurance, and advisory practices, we can help you find ways to thrive even in a period of uncertainty. Whether you're preparing for regulatory changes, putting FinTech/InsurTech to work, or rethinking your human capital strategy, we work together with you to resolve complex issues, identify opportunities, and deliver value to your business.

Contact us

David Choi

RegTech Leader, PwC US

Tel: +1 (646) 471 6748

Adam Gilbert

Financial Services Advisory Regulatory Leader, PwC US

Marie Carr

Global Growth Strategy, US Financial Services Practice, PwC US

Tel: +1 (312) 298 6823

Cathryn Marsh

Leader, Financial Services Institute, PwC US

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