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RegTech: The financial industry's new best friend?

Source: Asia Insurance Review | Jul 2017

InsurTech Regulation

RegTech has become one of the key areas to watch in 2017. This trend will continue in the months ahead, especially as insurers continue to discover its benefits, says Mr Henri Arslanian from PwC who highlights the five things you need to know about this trend.
 
 
1 What is RegTech?
RegTech, short for regulatory technology, is the use of new technologies in the financial services industry to address compliance and regulatory challenges not only more efficiently but also more effectively. 
 
   There are now numerous RegTech start-ups globally tackling pain points, from KYC and client on-boarding to compliance monitoring and fraud detection, using some of the latest technologies, from big data analytics to artificial intelligence.
 
Why is the RegTech industry moving so quickly?
Unlike traditional FinTech or InsurTech, where there is an element of competition between financial institutions, RegTech is an area in which everyone could win by cooperating. 
 
   RegTech startups serve almost all B2B offerings and are not aiming to disrupt incumbents but rather to empower them. Thus, incumbents are not feeling threatened but are keen to further explore these new solutions. In addition, many financial institutions, including insurers, may potentially be happy to cooperate with their peers if that would result in substantial cost savings.
 
What challenges are RegTech startups facing?
In addition to the traditional problems faced by B2B FinTechs, from long sales cycles to lengthy procurement processes, RegTechs have to manage additional hurdles of increased IT and security approvals as they deal with sensitive areas such as risk or compliance.
 
   Another challenge frequently faced by many of these RegTech solution providers is that they are highly dependent on the quality of data provided to them. For example, if the data provided by an insurer is noisy or inaccurate, then the output will not be insightful enough.
 
What do regulators think of RegTech?
It will come as no surprise that regulators globally have been encouraging the adoption of RegTech and in many cases becoming clients themselves. 
 
   Many of these RegTech solutions allow financial institutions to not only streamline their reporting but also to have better oversight of their data. This makes it easier for regulators when they need time-sensitive information from a bank or insurer. In addition, RegTech startups generally do not need to be licensed as they are mainly technology providers, thus making life easier for regulators.
 
5 What will happen to regulatory and compliance jobs?
While RegTech solutions may enable a reduction in headcount in compliance or regulatory roles, they are far from eliminating such roles entirely. Human talent is still needed not only from a governance or policy perspective but also to tackle the more complex cases where judgement and expertise are vital. 
 
   However, RegTech solutions can address the less risky, high-volume, and time-consuming roles which are cost-intensive for any financial institution. A 
 
Henri Arslanian is PwC’s FinTech and RegTech Lead for China and Hong Kong. A lawyer and banker by background, Henri is also a TEDx speaker, a university professor, a published author and sits on several finance, academic, government, civil society, and FinTech-related boards. He is regularly featured in the media and has been named as one of the Most Influential Individuals for FinTech in Asia.
 

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