COVID-19 Sparked RegTech Reawakening

When much of the country was shut down last year because of the pandemic, federal bank regulators had to manage most of their operations remotely. They had to to conduct virtual audit and accept data and reports from financial institutions digitally. Digital reports turned out to have surprising benefits.as regulators were getting more data and real time data, which was giving them better images of what was going on at the banks. 

Financial institutions also started to realize the benefits of technology in increasing scale, lowering costs, and improving the accuracy of reports sent to federal regulators. Systems that allow banks to search for trends in preventing fraud and assessing risk gained more popularity during the pandemic as these tools' ability to deter future problems. In an article for Bai.org, our Tim Mueller explains that regulators and bank compliance officers were seeing the benefits of automated systems in compliance applications, greater consumer use of technology in retail bank transactions was bound to shine an even brighter positive light on financial institutions' overall use of technology. 

To continue to support operations where customers are using digital systems, banks are increasing their overall use of artificial intelligence, machine learning and data mining through their organization, says Mueller. 

Technologies involving artificial intelligence and machine learning especially attracted the interest of financial institutions, Mueller explains. Such systems allow banks to analyze data to spot regulatory irregularities and potential fraud. 

Processes that use machine learning to set off  alerts are also becoming more common, Mueller says. “Banks can use their experience to build tools based on machine learning so they can classify transactions based on real risk. These tools can identify transactions that are likely to generate a lot of risk and send out alerts.”