Compared to pre-financial crisis spending levels, operating costs spent on compliance have increased by over 60%[1] for retail and corporate banks. With that, the global demand for regulatory, compliance and governance software is expected to reach $118.7 billion by 2020.
Investments and regulatory compliance solutions, however, cannot be seen exclusively as an expense account anymore and proven to be worth the hassle. Estimates suggest that investments in regulatory software can lead to an ROI of 600%[2] or even more with a payback period of fewer than three years. While the estimate is allowed to be off, case studies prove investments in risk, governance, and compliance solutions to be bringing material benefits to clients across industries.
Use cases of RegTech solutions are much broader than commonly known regulatory reporting. Identity validation, risk management (which includes scenario modeling and forecasting), transaction monitoring and auditing systems, web due diligence and security, identity controls – these are just some of the cases where technology startups are actively filling the gaps.
But to understand what RegTech means for a business, one needs to assess its material benefits in real-life deployments. Let’s look at some of those.
Fenergo[3], for example, a provider of client lifecycle management software solutions for investment, corporate and private banks, shared a case study[4] demonstrating the opportunities regulatory and compliance software opens for institutions.
For Fenergo’s global investment banking client, the KYC client review process was manual, and highly inefficient, culminating in thousands of hours of interactive (fully engaged) time to complete. In fact, the company reports that it took on average 27 hours to complete the KYC review process for one medium-risk client. And that calculation did not even include additional elapsed time for review, the time it takes for clients to respond to the financial institution’s request for additional or updated data and documentation. With 2,500 to 3,000 clients classified as ‘medium risk,’ it meant that the KYC client review process for medium-risk clients took between 67,000 to 81,000 hours to complete for that client.
The most interesting part comes after the implementation of Fenergo’s rules-based workflow platform, which supported the end-to-end cycle time for KYC remediation case handling. The software implementation resulted in a 37% improvement on case handling time and efficiencies for the medium client risk category alone. This reduced average handling time for each case down from 27 hours each to 16.47 hours, shaving off a cumulative average of 27,380 hours in total for the medium risk client category for the investment banking client.
That is just one of the interesting cases shared by the firm, with other tech companies offering their own demonstrative cases.
Among the large tech companies, IBM is a frontrunner with its extensive suite of solutions covering risk and compliance functions. In January 2018, the Big Blue published a
