During our recent Digibanc RegTech Breakfast Briefing event held in March, we gathered with industry leaders from across MENA to discuss the opportunities, benefits, and how to overcome challenges to successful RegTech adoption. Co-hosted by Bahrain Fintech Bay, this in-person and virtual event brought together thought leaders from Bahrain and the region’s leading financial institutions.

RegTech at a Glance

The UK’s Financial Conduct Authority (FCA) defines RegTech as “A subset of fintech that focuses on technologies that may facilitate the delivery of regulatory requirements more efficiently and effectively than existing capabilities.” In short, RegTech refers to technologies that simplify an organization’s ability to manage and respond to regulatory and compliance requirements. This includes:

• regulatory reporting innovation,
• KYC governance,
• financial transparency,
• risk analytics, and
• financial crime mitigation.

Driven mainly by the increased scrutiny of regulators and rising compliance costs resulting from the 2008 global financial crisis, RegTech has been steadily growing in adoption worldwide. In addition, the evolution of data science, progress in AI development, increase in cloud infrastructure usage, and demands for more cost-effective compliance solutions have all been contributing factors to the rise of RegTech.

Organizational Compliance Challenges

Today’s financial institutions encounter multiple compliance challenges, facing increased scrutiny and struggling to adapt their compliance process to respond to changing reporting dynamics and regulatory requirements.

Worldwide, banks have paid almost $300 billion in regulatory fines since 2008, and that’s not including the negative impact on an organizations reputation as a result of non-compliance, showing the high cost of overlooking this crucial aspect of management. During the Breakfast Briefing, Ahmed Adel, Territory Sales Manager at Codebase Technologies, outlined the following key organizational compliance challenges.

Cost & Time of Compliance

The Competitive Enterprise Institute notes that the average cost of compliance per employee in a large financial firm is roughly $10,000. Furthermore, global banks have reported that their cost of compliance has increased by 60% post-crisis.

This increase in cost has had a significant impact on organizations in MENA. MENA organizations doing business globally need to comply with international standards, which drives their costs up. At the same time, regulators are becoming stricter with compliance requirements enforced on banks in various jurisdictions.

Additionally, 10-15% of financial institutions’ staff are allocated to governance, risk management, and compliance, making this highly time-consuming for institutions. The resulting high costs and time of reporting are pushing MENA firms to find ways to optimize efficiency and save costs.

Lack of Compliance Vision

In the past, institutions lacked a clear compliance vision, hindering their strategic growth. However, post-crisis developments have reshaped their perspective, recognizing the significance of compliance as a vital component of business operations.

To achieve a comprehensive vision for the future, organizations are now embracing technology and data-driven approaches to enhance compliance, foster innovation, gain valuable insights, make informed decisions, and maintain a competitive edge. This shift reflects a strategic commitment to evolve and adapt in an ever-changing landscape of regulatory requirements.

A clear vision for compliance and regulatory reporting involving technology is increasingly pertinent in MENA. That’s because 59% percent of MENA compliance leaders foresee that scrutiny of tech-enabled business models and data privacy issues will now be top of their regulators’ ‘to-do’ lists.

Data Challenges

Financial institutions have several sources of information and data. Depending on the specific regulator’s requirements, banks have to collate data from various sources to comprehensively meet reporting requirements.

This can be problematic if a unified data management process is not in place. That resulting in extensive manual time to compile reports, higher costs, and data inaccuracy. Furthermore, depending on organization’s business nature and countries of operation, reports might need to be filed in different formats and templates. This adds yet another challenge.

Lack of Technology Knowledge

In an EY study, 52% of executives reported that their top compliance department priority is technology adoption and data-driven approach. Additionally, 32% of MENA businesses plan to invest USD 3 to 5 million in compliance technology in the future.

Organizations in MENA have been slow in RegTech adoption due to a lack of technology know-how and outdated mindsets. However, this is quickly changing as organizations push their digital agendas across all departments.

Embracing change on a regulatory level is as much a case of innovation in process and digitalization as it is changing mindsets. 52% of compliance leaders in MENA report a lack of consistent guidance in compliance technology from regulators. Therefore, we see more regulators putting technology at the top of their agenda.

Benefits of Automated Regulatory Reporting

Automated regulatory reporting solutions like Digibanc RegReporting can empower organizations with digital capabilities, giving them an edge on compliance processes.

Risk Reduction

Automated regulatory reporting can positively impact an organization’s risk management process by eliminating any chance of human error throughout the process. A compliance department can improve risk management & efficiency by ensuring data accuracy, utilizing multiple data sources, and implementing pre-configured workflows. In addition, organizations benefit from streamlined workflows, unified reporting templates, and enhanced insights based on various data sources across the organization.

Cost-Savings

Adopting an automated regulatory reporting solution can have a game-changing impact on an organization. By implementing Digibanc RegReporting, KFH-Bahrain reduced its compliance task cost by 90% and reduced overall reporting time by over 80%. Furthermore, KFH-Bahrain was able to improve its operating efficiency by 100%. Such significant improvements in compliance reporting give a financial institution an enhanced competitive edge in today’s dynamic market.

Enhanced Efficiency & Accuracy

By removing human error, unifying templates, and automating data collation, an organization implementing Digibanc RegReporting can improve its compliance accuracy and efficacy by as high as 90%, as was the case with KFH-Bahrain. Such a colossal impact drastically reduces the risk of non-compliance and incurring heft fines from regulators. Furthermore, an optimized workflow also improves the overall relationship between institutions and regulators.

Data-Driven Decision Making

Leveraging data is key to decision making, and one of the most beneficial aspects of automated regulatory reporting is better data visibility. From board to line manager level, regreporting allows for improved decision-making across the entire organization with unified and streamlined workflows.

Why Digibanc RegReporting is Right for You

A component-based approach such as the one offered by Codebase Technologies allows firms to rapidly launch their automated regulatory reporting solutions. Instead of building from scratch, we can leverage our experience in previous implementations and use our ready-made solutions to revolutionize how a firm manages its regulatory reporting process and workflows. Our first-to-market platform automates financial data collection and aggregation, calculation and processing, and generation of regulatory reports. The solution includes:

– A user-friendly GUI-based mapping interface.

– Fully customizable query-based reporting.

– ETL processes.

– Integrated environment.

– Integration with any legacy core banking system and database.