“Regtech is the use of new technologies to solve regulatory and compliance requirements more effectively and efficiently,” the Institute of International Finance (IIF), a Washington-based association, said in a report earlier this year, describing what the ‘regtech’ buzz is in just one sentence.
In recent years, financial institutions, professional services, and businesses have been facing constant regulatory changes and updates. Businesses are continuously asked to adopt newer and more complex sets of rules.
The various banking supervisory authorities in Europe alone and their various and changing capital and minimal reserves requirements for banks is just one example of how many different regulations a single financial institution needs to process, adopt, comply with, and report regularly to authorities.
The financial markets authorities, for listed companies, or the competition authorities at both national and supranational level, and just about any regulator in any industry, if you will, have been piling up regulatory updates for businesses to digest.
Organizations need to understand and act on those regulations within a set timeframe, which drives costs for compliance and reporting up. Businesses also need to ‘translate’ new legislation into their own articles of association and the way they run their internal processes: there it is another item in their expenses column.
Regtech, a kind of ‘spin-off’ from Fintech, has emerged to address those regulatory requirements and help companies with the heaps of data which the regulators demand on the one hand and the huge data that businesses need to go through, understand, and implement, on the other hand.
Regulatory technology, coupled with semantic technology, opens up opportunities for enterprises and financial institutions to reduce exposure to risk and cut expenses for lengthy and costly compliance-and-reporting processes.
The use of Linked Data in data integration is a powerful and simple way to consolidate seemingly incoherent diverse data from disparate sources in various formats into one whole set of data and information capable of revealing new knowledge and providing valuable forward-looking insights and predictive models.
To put it in just one sentence, regtech combines information from the legislation and regulation available to the public with the enterprise-specific policies and procedures.
Here comes the power of Linked Data in making computers apply one standardized and universally recognized version of all the information out there and all information specific to a given business. Semantic technology enables computers to have one common ‘understanding’, or ‘interpretation’, of regulatory concepts and identify the links between concepts in legislation with internal processes and procedures.
When semantic technology and graph databases create the links between concepts and keywords, they give businesses smarter data by revealing the meaning and uncovering relationships, that is how one concept is connected to another within a free-flowing text. Thus, the legislative lingo of the regulatory authorities – which even people struggle to understand – becomes information that computers can index and map to other similar or identical concepts. In this way, businesses adapt to the constant regulatory changes more easily and flexibly and at a lower cost.
Furthermore, the power to have technology capable of linking information and making sense out of complex terminology enables organizations to have all their information structured in a meaningful way for managers to gain insights from.
So, semantic technology has a role to play in every step of the regulatory compliance and reporting process: it helps with analyzing regulations and implementing rules, and it also allows for seamless data integration, analysis, and storage.
Last but most certainly not least, semantic technology is helping with advanced data analytics to improve the quality of information, reveal insights, and predict and prevent fraud.
The ability to link employee and customer behavior with geospatial data, historical data, or social media data can reveal potential concerns that fraud is being attempted or done. By flagging fraud attempts or preventing such, enterprises not only enhance their own compliance with the rules, they also contribute to improving the regulatory framework of their industry by reporting valuable insights to authorities.
A better operating regulatory environment, coupled with semantic technology able to reduce compliance costs, also works toward a level playing field for smaller businesses to make their way into a given industry. And in general, increased competition leads to consumers being better off. For businesses, satisfied customers mean retention and opportunities to expand in services and markets.
According to EY’s global governance, risk and compliance survey 2015, 85 percent of respondents surveyed said that they see an opportunity to additionally improve the linkage between risk and business performance.
“Organizations are able to clearly identify the key risks to ‘own’ that not only result in negative consequences but also those that generate value, enabling a direct linkage between risk and business performance,” EY says in its survey.
Organizations using regtech and semtech find value in the resources they save by replacing lengthy and costly regulatory processing with smoother data integration technologies that reveal all their proprietary information and the links to external sources, data sets, and concepts.
Businesses using smarter data also gain smarter content and insights. Insights and predictive analytics make strategic planning easier, resource allocation smarter, and identification of business opportunities – richer and backed by additional multi-layer and multi-faceted data.
In a nutshell, semantically-enriched regtech ultimately leads to minimizing risks and maximizing opportunities for boosting business performance and revenue.
Run your first query and discover meaning in your data