In a new report, the European Banking Authority (EBA) outlined proposals to encourage the adoption and use of RegTech in the EU — which, its providers argue, boosts efficiency and effectiveness and lessens the impact of regulatory changes.
RegTech is most commonly used for anti-money laundering (AML), countering terrorism financing, fraud prevention, prudential reporting, ICT security and credit assessments, the report noted.
While the EBA found that the regulatory framework is not the main obstacle to RegTech adoption, “a lack of common regulatory standards across the Member States could pose barriers for wider market adoption of RegTech solutions across the Single Market,” the EBA said.
The EBA’s proposals to support the adoption and scaling of RegTech include activities to increase knowledge and reduce skill gaps among regulators and supervisors, taking steps to “harmonize the legal and regulatory requirements” and leveraging the role and expertise of the European Forum for Innovation Facilitators (EFIF) and regulatory bodies and innovation hubs as places to test RegTech solutions.
According to the EBA, financial institutions (FIs) list better risk management, monitoring and sampling capabilities, along with reduced human error, as RegTech solutions’ key benefits. RegTech providers, meanwhile, cite the ability to boost efficiency and effectiveness and lessen the impact of regulatory changes.
Most of the challenges to the development of the RegTech market stem from internal factors including data security, quality and privacy, interoperability and integration with legacy systems, and limited awareness of RegTech solutions.
For more on the promise of RegTech, read our 2020 interview with Tsafrir Attar, vice president of digitization at Surecomp. “Previously, regulation was very slow in adapting and approving of different technology,” he told PYMNTS last year. “Today, we can see loud and clear, now the regulators [are becoming] more supportive of this, and understand that the only way to help the industry is to approve new tools.”