The RegTech growth corridor: 2022 trends spanning Asia and across the world – The Paypers

Deborah Young and Alex Ford from The RegTech Association discuss regtech themes in 2022, with a spotlight on the fincrime scene in Asia.

While the pandemic has driven many economic shocks around the particular world, regtech has thrived and offers seen the appetite for the solutions’ growth, job creation, plus experience significant new capital flowing into the sector. There has also been a shift in Government thinking around RegTech as it expands its remit beyond traditional financial services into other regulated industries.

RegTech themes within 2022

Founded in Australia, the particular third-largest RegTech hub in the world, The RegTech Association (RTA) has the growing global remit and presence with 150 member organisations. From discussions along with our members, going into 2022, we think the following themes will be continuing throughout the year:

1. The top risk areas addressed by RegTech in financial services is going to be Conduct Risk and AML/CTF and Sanctions Risk;

2 . Institutions will show a strong preference for buying rather than building solutions;

3. There will be a growing demand for the best within breed RegTech vendors to address each category of risk;

4. Increasing trust between supply and need sides of the market, shortening of the particular sales cycle, and reduction in the time to value;

5. The pitch to win ratio through founders to institutions will be increasing;

6. More institutional (including corporate VC) plus professional funds flowing in;

7. New demand from non-traditional sectors of RegTech (Energy, Telco);

8. The particular RegTech family will expand to include workforce management solutions and other new applications.

All in all, favourable investment conditions, growing recognition of new market segments as customers for RegTech, shortening from the sales cycles, increased education, and development of a common language simply by established RegTech taxonomies (like RTA’s), plus access to the directory of vendors will certainly be all assisting and enabling speedier commercial outcomes.

FinCrime spotlight across Asia and the globe

RegTech is often ‘born global’ and with good reason. Regulated entities operate in a global context plus although regulation may vary by jurisdiction, worldwide best practices tend to align, particularly among Tier 1 financial institutions. In the world of financial crime compliance (FCC) where the Financial Action Task Force plays an overarching role, this is very much the case. Some key areas with regard to focus within Asia, also playing out globally in 2022 consist of:

Customer experience/compliance ‘trade-off’ remains a challenge. FIs need cross-functional approaches to implementing technology so their risk-based approach and resulting policies prove effective while leveraging tech to optimise customer experiences.

The sanctions landscape is shifting – existing sanctions upon China as well as the evolving situation between Russia and Ukraine require FIs operating globally to be prepared along with risk assessments and their own risk operations to adjust and respond with agility because new requirements become clear.

Perpetual KYC (pKYC)/event-based KYC is an evolving picture along with varying levels of maturity throughout financial organizations across the globe plus even within FIs across divisions. The particular retail/consumer challenges with ID+V are varied and different from the complex world associated with corporate KYC which demands a more sophisticated architecture and integrated internal and external systems.

Tech-first approaches dominate strategy – unsustainable, ongoing expense in processes that depend on people are being re-examined in favour of ‘tech-first’ strategies. Today’s investments within infrastructure reduce tomorrow’s customer friction whilst eliminating inhibitors to cost and scale. FIs are using digital transformation initiatives as an opportunity in order to review old ways plus simultaneously uplift compliance.

Crypto and MSBs continue to become in the spotlight. This means that customer due diligence on those parties transacting via these platforms requires further investigation given the increased risk profile when dealing with non-fiat-based digital currencies.   As crypto is not a central bank-issued currency, the value of crypto has increased exponentially and as the popularity of crypto grows as an investment class, governments plus regulators are increasingly concerned over the potential impact on monetary policy and risk associated with money laundering when using crypto.

Convergence of traditional data teams, MDM, and FinCrime objectives — ‘Having the particular data is not enough’ – ensuring it’s the right data, it is current, it’s independent, plus that it can be fully leveraged across multiple systems and processes remains a challenge.

ESG is a major theme – The monetary services industry is seeing increasing public discourse close to climate change, environment, social and governance (ESG), diversity, and inclusion (D& I), and business social responsibility (CSR). Governments and regulators are taking note plus even proposing guidelines as well as regulations to deal with the various green initiatives. Investors and the public are increasingly demanding that will companies identify climate-related risks in their particular financial results. ESG non-compliance will result in penalties on economic institutions that violate these new regulations, therefore requiring policies plus processes to be in place, such as additional workflow processes and data sources among some other measures.

Regulators continue to convene plus engage FIs, fintech, and RegTech communities and facilitate conversation plus innovation. For example , MAS’ Sandbox Plus is a recent enhancement enabling ongoing regulator and industry collaboration to raise awareness plus understanding of how RegTech and fintech options can be utilised. Another example is The City of London Corporation/RegTech Associates report issued April 2021 and the Kalifa Review of UK Fintech released Feb 2021 that are usually both calling for more active involvement simply by regulators inside the RegTech community, including actions to strengthen FI and RegTech partnerships. Innovate Finance has taken the initiative to convene a dialogue with their RegTech users to address the particular priorities raised in these reports, along with improving outreach in order to UK-based regulators. In the USA, federal regulators, through their innovation teams, have also established outreach programmes to better understand the latest technology trends that impact regulatory conformity issues.

Overall, we predict significant development during 2022 as Tier 1 plus Tier 2 financial services firms are turning their electronic transformation efforts to RegTech to bring productivity and efficiency, helping their own teams surface risks earlier and use these tools to make much better business decisions while protecting consumers. Furthermore, we would expect that will RegTech is going to be reasonably high on the agenda for Government authorities and government bodies as they seek in order to reduce red tape, get faster access to transparent information, and safeguard the stability of their economies.

This particular editorial was first published in our Financial Crime and Fraud Report 2022 , which showcases the innovation and progress the particular best practices and instruments used by financial institutions in their fraud prevention activities, to improve the digital onboarding process of their particular customers while fighting against financial crime.

About Deborah Young 

Deborah Young is the founding CEO of the RegTech Association. She is passionate about building a community that accelerates the particular deployment associated with technology that will drives efficiency and superior consumer results.

About Alex Ford

Alex Ford is a Non-Exec Director of The RegTech Association plus President of Encompass Corporation, North America. She partners with global FIs automating KYC.

Regarding The RegTech Association

Since establishing within 2017 as a non-profit, The RegTech Association’s (RTA) mission and vision have already been to accelerate the adoption of RegTech and create the global centre of excellence. Founded in Australia, the third-largest RegTech hub in the world, the particular organisation has a growing global remit and presence along with 150 associate organisations.