RegTech has typically been the domain of government bodies, given the oversight that regulation demands. However, there has been a subtle change, indicated by the recent call to action by The Bank of England. They, according to Reuters, have asked British businesses to start a process of self-regulation. By presenting a compelling financial case for implementing their own RegTech tools and platforms.
The central banks hope to inspire global financial institutions to take on greater responsibility for their customers in exchange for lowered overheads. This changes raises moral issues as to whether these institutions will operate purely in the interest of profit, or in the interest of customers, too.
Establishing Trust
It’s worth noting that consumers are generally wary of lenders. According to one study, trust by the public in banks sits at a meager 52%. In the USA, the most recent data analyzed by CNBC paints a similar picture, at 45.3%. It follows that it’s going to be a hard sell for most western economies to paint their financial institutions as trustworthy.
One potential boon is the amount of change weathered through the pandemic. Financial institutions were called on to provide an easement to a wide variety of consumers, whether on mortgages or through lowering charges on their accounts when it comes to late payments. Trust is steadily being built by deploying RegTech within enterprise IT, such as banking apps and making security endemic to the banking system.
Showing Expertise
The other challenge that US banks face is the need to show leadership and expertise. The financial crash of 2008 is still recent enough, and its effects well-founded, that the current generation is all too aware of the impact of poor quality regulation and compliance. Ensuring that the banks don’t take liberties with customer money, and stick to their own rules, is essential.
Again, proper financial management through the pandemic showed that businesses have the potential to act correctly. This will be an important message to hammer home. For consumers to trust the RegTech being deployed by businesses, they need to see its expertise.
Building the Technology
The use of new financial tools will be key in achieving this. Startup, or challenger banks, take a very proactive view of regulation. They use automatic passport recognition controls on their apps, walk customers through every stage of regulatory requirements, and efficiently make full use of where the law allows digital signing. Big financial institutions can take this on board to help build rapport with consumers and show that consumers can trust them.
In Conclusion
The benefits of building RegTech into a financial business are obvious. There are huge savings for one, and customers can enjoy a greater quality of life and high-quality products. In the modern digital economy, this is essential, and bringing regulatory compliance along with it is a necessity.