Other parts of this series:
- Growth of Regulatory Technology is Changing the Financial Services Landscape
- Overcoming Challenges in Helping Regulatory Technology Grow
- A New Model of Interaction for Regulatory Technologies
- RegTech as a Shared Utility
- Fostering the Continued Development and Adoption of RegTech
- The Future of RegTech
In the first blog in this series, we looked at the promise represented by the growth of Regulatory Technology (RegTech), as well as some of the barriers to the development and adoption of RegTech solutions. Two major challenges explored were the lack of harmonization of global regulations and the burden of navigating the “understanding” phase when new regulatory requirements are adopted.
These barriers impede RegTech developers’ progress, but they also diminish the attraction of RegTech from a user standpoint. No institution wants to purchase multiple and different solutions from different vendors. The on-boarding of a new supplier also represents additional cost and potential risk for the purchaser. By fostering a more standardized global regulatory agenda, regulators may find that potential users of external solutions would be incentivized to support the development (and purchase) of these offerings. In addition, industry regulators can assist RegTech developers by supplying low-cost guidance options to these companies. These can take the form of conference calls, webinars, on-line manuals and other communications efforts.
Another challenge for RegTech providers is the time to market needed for product development. For many financial institutions, the product development lifecycle includes regulatory rule interpretation, definition of requirements, and build and test phases. RegTech providers, however, need additional steps to build a business case and generate funding before the build phase can begin. They also need to market their product and provide at least a working prototype before the financial institutions start their own build process. While many large financial institutions spend a lot of money on legal advice and interpretation of proposed requirements to correctly build solutions, RegTech providers do not have access to the same resources. This puts a special burden on RegTech providers faced with tight implementation windows; it may be simply impossible to develop an effective solution in the face of a compressed implementation timeline.
In the next blog in this series, we will look at how some regulators have created new models for interaction as they develop regulatory frameworks, and at other possibilities for regulators, financial institutions and RegTech providers to increase collaboration and create solutions.
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