Robert Gothan, CEO and founder of Accountagility – the leading solutions provider for the finance function

The financial services sector is no stranger to new buzzwords, but whilst some fizzle out, others go on to reach the level that Fintech has achieved. These new buzzwords typically describe the developments being driven by new technology that is helping to change and disrupt the industry – and regulation technology (Regtech) is no exception.

Regulation in the financial services sector has increased significantly following the 2008 crash and the UK’s decision to leave the EU has left a question mark over how much EU regulation will be adapted, and how many new rules will be introduced. One thing is expected though, companies need to be geared up to deal with some level of new and changing regulations, making it more difficult to analyse data effectively. It is therefore more important than ever that companies have tools that are capable of coping with this high demand.

The rise in digital has already disrupted a number of sectors, and financial services is no different. Fintech has dominated the headlines in recent years and has proven to be more than simply a novelty, as it is enabling traditional financial services firms to innovate and thrive in the competitive global market. Regtech looks set to follow in its predecessors’ footsteps and seeks to take advantage of a gap in the financial services sphere by creating a more efficient and effective way of dealing with regulation.

This innovative technology will help firms to understand and manage any potential risk much more effectively, and also enable them to capture and store the data they need to produce in order to appease the regulator. This could have a huge impact on the industry and should help firms to process their data in line with newer regulations such as Solvency II, or the Senior Managers Regime.

Automation & regulation

As digital continues to move into every sector, it’s important that firms are updating their tools and processes to ensure they are working in the most efficient way possible. With new rules constantly being introduced or updated, remaining agile is crucial for companies that want to process and analyse their data in line with any industry changes.

The FCA recently said that that Regtech would transform the way companies manage their customer due diligence and change how anti-fraud measures work. By automating due diligence, tech will help businesses tailor their data to reflect how the company manages its risk.

Brexit has already shown how quickly things can change within the financial services sector and has highlighted the need for agile systems.  Having automated tools to cope with existing regulation will mean that an organisation is flexible enough to deal with any changes that may occur in the future.

Moving away from the classic spreadsheet

Many companies within the financial services sector still rely heavily on spreadsheets when it comes to analysing data. Whilst there are some instances where a spreadsheet is the best option, this is normally limited to a single set of data that will not change. Most companies, however, need to analyse vast amounts of data that are constantly changing – something which a spreadsheet is not equipped to handle.

Instead, businesses need to embrace automated planning and processing tools that are agile enough to cope with constantly changing information. M&S recently needed to amend its financial results – after they were published – due to a fault on a spreadsheet, which shows how unreliable this program can be with large data volumes.

Only time will tell whether Regtech will have quite the same impact as Fintech, but there is clearly a gap in the market for new technology to help companies within the industry cope with the regulations that are increasingly being imposed on them. As the sector moves towards more automated systems, businesses that are still using spreadsheets and old planning processes will struggle to compete with those that are embracing new digital tools that will help them remain both agile and successful.