Regulatory Technology or RegTech as it is commonly known is a critical sub sector of the FinTech ecosystem which has the potential to streamline the fintech industry in India. Consider this, India is the 3rd largest fintech market in India, has the top fintech adoption rates in the world at 87% compared to a global average of just 64%, so one can imagine the regulatory and compliance challenges we must be facing.
RegTech, with all the innovative technologies has the answer. It can quite simply transform the fintech industry in India by technology implementations which will make regulations and compliance efficient and seamless. However, the fintech industry in India is quite young and so is the RegTech sector, but the growth trajectory for both has been positive and RegTech certainly will have a revolutionary impact on fintech effectiveness.
Globally, the RegTech Market is poised to grow up to $28.33 billion by 2027 and concurrently the Indian RegTech Market is also supposed to show an upward trend. Emerging and disruptive technologies such as machine learning, natural language processing, blockchain, AI, will have an impact on RegTech proliferation and industry impact. Further, APIs, Data mining and analytics, Cloud computing and Virtualization will help influence RegTech propagation.
Critical areas of RegTech Impact on the Indian FinTech Sector
Compliance & Regulatory Automation
What worries the industry currently is the scale at which things are moving. So, RegTech will help with cutting down time on client onboarding. Automation in identification of unusual and fraudulent activities. Seamless, adoption and adaption of any new regulations that come into play. Swift enhancement in the areas of data collection and data analytics.
Elevated Fraud and Security Risk Management
India is has recorded 886.3 crore digital payment transactions with the value of Rs. 14.15 lakh crore by April 2023. That is a – 100 times increase in digital transactions in the last 9 years. So, one can imagine the scale at which Fintech and allied sub sectors such as payments are fraught with security and fraud risks. Effective implementation of RegTech will help the Indian fintech industry at large by enabling automated credit assessments to understand optimal exposure and limits; solutions in the areas of know your customer (KYC), real-time AML screening, AI/ML-based fraud prevention and analytics dashboard and predictive analytics for advanced risk management and end-to-end automation regulatory reporting.
Enhanced Consumer Experience
In the age of frictionless financial transactions and the digitization, consumers are not very forgiving. Effective use of any fintech service or product and customer loyalty depends drastically on the ease of use any financial service or fintech firm is able to provide. Speed, Security and Seamless – consumers love this and the Fintech Industry needs this. RegTech quite simply helps in making this happen. It helps is automating the onboarding process efficiently, simplifies the experience as reporting is made more user-friendly through more effective data models that are able to generate high quality data for different regimes with less effort. It’s a win-win for everyone. RegTech is essential in streamlining processes, organizing data more effectively, extracting insights, and enabling collaboration, which all directly or indirectly influence customer experiences and outcomes.
The Reserve Bank of India (RBI) in its 2023-24 agenda has clearly emphasized on key goals which focuses on central bank digital currency (CBDC), financial technology (FinTech), and regulatory technology (RegTech). RBI aims to support adoption of methods and tools to strengthen regulated entities, which a keen interest in exploring emerging SupTech sub set which is believed to enhance the implementation of regulatory processes.
RegTech is essentially here to stay and help define the Indian fintech industry. To learn more about how the Indian financial technology industry is positioned for growth and immense opportunities, then you shouldn’t miss participating in the 2nd Fintech Summit & Awards 2023, scheduled to take place on 9 and 10 November in Mumbai.