RegTech – Not Just for Startups

2018-October-29

After the 2008 crisis, financial institutions faced a mountain of new regulations and related challenges around data collection, monitoring and reporting. Hundreds of Regulatory Technology (RegTech) startups sprang up to help. But there’s one thing that’s often overlooked in the dynamic RegTech space: it’s not just about startups.

RegTech is about automation, intelligence and analytics. And the foundation for all of that is big data. A large, curated trove of risk intelligence data is essential for better KYC and AML screening as well as improved portfolio and transaction monitoring. While RegTech startups often bring exciting, innovative technologies to market, they lack the years of risk intelligence data and screening outcomes needed to power next-generation analytics engines. It’s astounding how much data is required to “train” an AI engine to the point where it can make even fairly precise recommendations or predictions.

Startups often lack the deep domain knowledge to develop solutions that address the challenge while also satisfying the regulators.  As a January 2018 report entitled “RegTech 2.0” by Burnmark/Alvarez and Marsal pointed out, “if you’re not also thinking about designing for the regulator, you’re not doing RegTech, you’re doing operational excellence”.

They may also struggle with scaling to meet the needs of large banks and financial institutions. On the surface, these organizations’ compliance and customer due diligence requirements can seem consistent and straightforward. However, as established RegTechs know, every customer is unique. Each comes with their own set of past experiences, requirements, constraints, business goals and review/approval processes. Being able to support this diversity can be especially challenging to companies still trying to establish themselves.

Fortunately, not all RegTech companies are startups. RDC is an excellent example. Like many RegTechs, it’s rich in technology. Our screening platform leverages advanced name-matching technology, machine learning and natural language processing to keep criminals out of the financial system while minimizing false-positives and excessive alerts. However, RDC has also amassed the world’s largest expertly-curated risk intelligence database in the industry, which enables comprehensive Adverse Media, Politically Exposed Persons (PEPs) and Sanctions/Watchlists screening. With nearly 1,000 customers across 100 countries, we’ve performed more than a trillion compliance screens, 350 billion of them in past 5 years alone. And because we serve 1 in 4 of the world’s largest banks, RDC understands how to support large, complex organizations.

Startups don’t have a monopoly on innovation, excitement and the latest technology. The next time you’re reviewing your compliance program, make sure you look at an established RegTech like RDC. You may be surprised just how far ahead of the curve we are.

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