Mid-sized banks have been managing risk and compliance through manual data entry, analysis, and reporting accomplished through general-purpose office productivity software for multiple decades. These systems always seemed to perform adequately. This has changed over the past five years – mid-sized banks across the country are now looking for modern risk and compliance technology solutions that can deliver faster and more efficient results. Large nationwide banks have been using tech solutions for risk and compliance for a long time but the technology is now becoming mainstream in smaller banks.

This change did not occur because banks have more customers to deal with – this change is caused by multiple factors and developments that have exposed the weaknesses of legacy risk and compliance management methods.

The slow speed of legacy banking practices

One of the most profound changes that banks are grappling with is that customers now expect banks to work instantaneously. Banks always had the luxury of time. If someone wanted to open a bank account, it was understood that the bank will take a few days to process everything and may require multiple visits to a physical branch of the bank. The same was true for transactions. It was normal for a transaction to take a day or two to go through. It was understood that these things take time, that banks will have to verify everything before they complete the account opening or the transactions.

Customers are no longer receptive to waiting because they are used to other services that work instantaneously. There are apps which customers can download and sign-up for in a few minutes, compared to the many days it would take to open a bank account at a bank. The transactions in these apps are also instantaneous. If a customer wants to send money to someone, they simply enter an amount, provide verification, and the money will transfer to other person in few seconds.

The complexity of regulatory compliance

When we talk about the slow speed of banking, it is important to note that this slow speed is not by choice – banks do not want to provide these services at a slow speed. The real problem is that the regulations that bank must comply, these regulations are complex and strict. Most of these regulations are themselves decades old, written and passed in an era before information technology changed the way we interact with businesses. The apps that can deliver instantaneous services do not need to comply with these regulations because they are not banks and thus can deliver faster and better services.

Banks cannot ignore these regulations, so they do not have a choice. They must take their time to ensure that all the processes are being followed as required by the regulatory bodies. This puts them at a disadvantage; their born-digital competition is gaining market share by bypassing the many problems the banks must deal with. Banks need a way to deliver services that allows them to be faster and more efficient while still managing risks and being compliant with rules and regulations.

Mid-sized banks have been managing risk and compliance through manual data entry, analysis, and reporting accomplished through general-purpose office productivity software for multiple decades. Click To Tweet

How Regtech is evolving mid-sized banking

Regtech (short for regulatory technology) is a subdomain of Fintech. Regtech enables banks to deliver faster services by increasing the speed of regulatory compliance processes. This is accomplished through a multi-pronged approach aimed at eliminating all the time-sinks present in risk and compliance processes. Parts of risk and compliance work are completely automated. Processes which cannot be automated are reworked with streamlined workflows augmented with technology.

It is necessary for mid-sized banks to have access to risk and compliance management technology, because keeping up with evolving consumer demands means that they must deliver risk and compliance at a faster pace. Regtech can empower smaller banks to think bigger by enabling better regulatory insights, risk intelligence, increased compliance levels, enhanced visibility into operations, and much more.

Better regulatory insights

Regtech solutions can instantly notify users about latest regulatory intelligence and changes. They provide a feed of updates from official regulatory sources as well as intelligence from magazines and trade publications. This data can also be used by some solutions to help implement regulatory changes. A.I. powered solutions can parse regulatory texts and highlight relevant changes.

Risk intelligence

Regtech solutions monitor known risks and can instantly notify banks about any changes. Risk management solutions can monitor Key Risk Indicators and other metrics to detect emerging risks, enabling banks to proactively mitigate their harmful effects.

Increased compliance levels

Having access to compliance technology allows businesses to monitor compliance 24/7 and automatically detect problems in the compliance framework. Compliance tasks and corrective actions can be quickly completed thanks to activity management features that allow the organization to easily collaborate.

Enhanced operational visibility

The managers and the board members of the bank get unprecedented visibility into the operations of the bank through real-time dashboards. They can see all the important metrics, open risk and compliance issues, the latest notifications, and much more on their executive dashboards and instantly intervene wherever required.

There are many other Regtech features which can help mid-sized banks modernize the way they handle risk and compliance. Interested in seeing how your bank can use these technologies? Get in touch with out experts for a demo of Predict360, our American Bankers Association endorsed compliance management solution.