Global Regtech Financing Trends

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Usage of IBM’s AI tool, Watson for Financial Services, is gaining traction with customers as AI and machine learning (ML) technologies continue to dominate the spotlight.

Now, the software giant has announced the launch of three new Watson-powered regtech solutions for financial institutions (FIs). Watson was trained by IBM subsidiary Promontory’s risk management and compliance experts to understand and interpret regulatory language. All three solutions are now available on the IBM Cloud.

Here are the three new regtech solutions being rolled out:

  • Watson Regulatory Compliance. This solution will give compliance professionals access to a library of regulatory requirements, in which materials can be filtered geographically, by business type, product, and compliance area. It also enables subscription to only the sections of a regulation relevant to a particular company. Regulatory publication volumes are rising, which means automated and customizable tools are becoming more essential than ever.
  • IBM Financial Crimes Insight with Watson. This tool is designed to speed up due diligence operations, including processing anti-money laundering (AML) alerts and executing know-your-customer (KYC) procedures. IBM says Watson will help compliance staff reduce false positives and streamline the investigation of AML alerts submitted for review. False positives are a widespread problem for compliance teams, so a more efficient alert system could save banks time.
  • IBM Algo One Big Data Foundation. This solution is geared toward helping banks manage liquidity and market risk. Watson will use structured and unstructured data sets to generate insights that banks can use when developing new business strategies and assessing their compliance status. Banks spend heavily on meeting liquidity and capital requirements, suggesting more accurate risk assessment will be welcome in this sphere.

IBM seems to have all things in its favor to emerge as a key player in the regtech sector. It already has extensive expertise in the financial services industry as a software supplier, and Watson is recognized as one of the most sophisticated AI tools at a time when the technology is increasingly in vogue and seeing high demand. Moreover, IBM has not only a powerful reputation that will attract new, risk-shy FI clients who might be reluctant to outsource compliance to fintech newcomers, but also an existing loyal FI client base to which it can cross-sell its new solutions.

Despite having one of the largest fintech industries in the world, the U.S. is noticeably behind other regions when it comes to one factor crucial to the future growth of this burgeoning sector — regulation. 

The U.S. regulatory environment is holding back fintechs and hindering their chances of success. 

Sarah Kocianski, senior research analyst for BI Intelligence, Business Insider’s premium research service, has compiled a detailed report on U.S. fintech regulation that:

  • Examines the current regulatory landscape in the U.S. 
  • Explains how it is negatively affecting the fintech industry.
  • Outlines the initiatives currently in play from major regulatory agencies. 
  • Considers the future of U.S. fintech regulation and its potential impact on the fintech sector. 

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