The RegTech Effect: Unleashing Innovative Capacity With Cost-Efficient Data Management and Reporting Solutions

January 17, 2017     By : Elena Mesropyan

Compliance consumes innovation opportunities

In the financial services industry, compliance is not an option. It is the speed-inhibiting layers of operations that are extremely expensive and becomes even more expensive if not done correctly.

Just to understand how expensive and resource-consuming compliance is, professionals have emphasized the following stats:

  • Globally, around $80 billion is spent on governance, risk and compliance, and the market is only expected to grow, reaching $120 billion in the next five years.
  • Over 300 million pages of regulatory documents will be published by 2020 and over 600 legislative initiatives need to be cataloged by a medium-sized sell-side institution in order to have a holistic view of their rulebook.
  • Between 2009 and 2015, the fines and settlements in the financial services industry in the US only hit $204 billion, paid out through 175 settlements.
  • Compliance costs for financial institutions amount to substantial parts of total expenses, with a negative correlation between the size of the institution and the percentage of total costs. While banks with assets ranging from $1 billion to $10 billion reported total compliance costs averaging 2.9% of their noninterest expenses, banks with less than $100 million in assets reported costs averaging 8.7% of their noninterest expenses.
  • On average, financial institutions have 10–15% of their staff dedicated to compliance.

Compliance is undoubtedly a critical part of a sustainable business within the financial system. It is, however, one of the most restraining forces, absorbing substantial financial and human resources, which instead could be reallocated for innovative growth and development.

While there are important beneficial implications of appropriately stringent regulatory environments across industries, accelerating the pace of innovation in those industries puts institutions under stress of timely response to regulatory changes and increases the risk of non-compliance expenses. Meanwhile, market saturation with tech-powered competitors pushes institutions into the hunt for efficiency-boosting solutions in order to reduce costs and release talent for an appropriate response to changing market conditions.

RegTech unleashes the innovative power of financial institutions

Regulatory technology (RegTech) forever shuttered the way compliance has been ensured and presented the market with over a hundred RegTech innovators, applying the power of modern technological advancements to compliance. Within itself, RegTech is a diverse community of bright entrepreneurs solving various regulation-related problems for financial institutions, among which are KYC/CDD, AML, risk management, market surveillance, fraud detection, etc. In that regard, RegTech ‘shares a wall’ with FinTech startups that are offering solutions for same problems, but are not particularly compliance-oriented – cybersecurity companies, real-time fraud detection companies, a range of identity verification solutions, etc.

There is, however, one particular class of innovators within RegTech that has probably the most profound effect on unleashing innovation in the financial services industry by driving down compliance and non-compliance costs – data management and reporting solutions providers that allow financial institutions to tackle rapid change, regulatory pressures and increasing global competition.

Billions spent by financial institutions on comprehending and reconciling changing regulatory requirements can be beneficially reallocated, enabling institutions to pursue initiatives that will transform the business, ensure its sustainability and success in a highly competitive market.

Data management and reporting solutions as vital enablers of cost reduction and enhanced operational efficiency

As the banking sector goes through enormous changes under the influence of such factors as digitization, the rapid growth of value streams and data accumulation, compliance requirements also evolve. Therefore, resources necessary for monitoring and adaptive response multiply rapidly. The same is happening with expenses on non-compliance issues settlements, resulting in billions lost for investments in innovation programs instead.

RegTech companies providing data management and reporting solutions, therefore, are critical enablers of cost reduction and innovation adoption. One of the most interesting representatives of that class is HEXANIKA™, which has developed simple, smart, and efficient software that harnesses big data and machine learning to automate data ingestion and rules creation for analytics and reporting.

In addition to innovative patented software, HEXANIKA™ has built an ecosystem of infrastructure and deployment in association with FIS, IBM, Accenture, Synpulse and other consulting firms that enables banks to leverage the technology on secured “bank-ready” cloud and subscribe to managed services, making HEXANIKA™ a completely unique offering.

HEXANIKA™’s software enables scaling rules across varied reports, regulators and geographies, providing 100% data lineage and transparency; saving time by 40%; driving down the costs by up to 40% and enhancing data quality, accuracy and consistency by 35%.

“What we want to help banks do, is reduce costs, reduce dependency on [hiring compliance officers and keeping them up to date] and help banks focus on their business rather than regulatory compliance, which is what they want to do,” shared Yogesh Pandit, a HEXANIKA™ Co -founder and CEO.

HEXANIKA™’s solution can be easily deployed on premise or on cloud infrastructure – allowing businesses to prioritize the core benefits of each option from complete control and responsibility to speed, scalability and flexibility. The vital benefits that HEXANIKA™ delivers to financial institutions are:

  • Automation in the process of data ingestion and rules creation using semantics and machine learning algorithms engine, speeding up the process
  • Reduction of costs of operations and significant improvement of clients’ data visibility, accuracy, and reporting capabilities;
  • Automation of traditional coding processes that reduces resource dependency.

The year 2016 was eventful for HEXANIKA™ – the company got wide recognition by the industry professionals as one of the most promising and forward-thinking enablers of innovation in the financial services industry.

The uniqueness of HEXANIKA™ solution is indicated by its success and recognition in the dedicated community of professionals – HEXANIKA™ was selected:

  • In the FIS VC FinTech Accelerator program powered by FIS Global, which kicked off mid-May, 2016 in Little Rock, Arkansas.
  • As FIS’s High Potential (HiPo) Network Partner. FIS HiPo Network is a group comprised of early-stage FinTech companies that have demonstrated significant strength in developing solutions that disrupt, and/or fit a strategic need within financial markets. This partnership acknowledges that HEXANIKA’s software in combination with FIS’s ecosystem adds significant value to the FIS client base.
  • To pitch at Silicon Dragon Pitch NY 2016 in June in New York.
  • For the TiE50 2016 Top Startup Award in May 2016 at the prestigious TiE50 Technology Awards Program.
  • To pitch at FinTech Rising in March in New York, an event for the financial services community to come face to face with innovators and meet top entrepreneurs, investors and decision-makers. At this event, the entire IBM team was in attendance to support HEXANIKA™.
  • For the SixThirty FinTech Accelerator program in St. Louis, MO. HEXANIKA™ met with Federal Reserve Bank of St. Louis as well as several regional banks in St. Louis such as PNC Bank, UMB Bank, Eagle Bank and Trust Company of Missouri and State Farm Bank
  • To attend a working session on FinTech with Congresswoman Ann Wagner – US Representative for Missouri’s second congressional district and who also serves on the House Financial Services Committee.
  • In a virtual Congressional FinTech roundtable with Congressman French Hill, second District of Arkansas and Congresswoman Ann Wagner. Agenda of the roundtable was to discuss the impact of regulations on financial services industry and the role of FinTech and regulators in helping banks to comply with regulations.

HEXANIKA Starts 2017 with a bang!

HEXANIKA™ has been selected to present at the FIS RISC Summit 2017. The Risk, Information Security and Compliance (RISC) Summit is a premier risk and compliance conference that will be held in San Diego from Jan 18–20, 2017. This unique conference sponsored by FIS presents an opportunity to learn from regulators and other experts about upcoming regulatory risks in 2017 and how best to manage them.

HEXANIKA™ will be involved in the below activities:

  • FIS RISC Summit breakout session: HEXANIKA CEO Yogesh Pandit will co-present with FIS Global on ‘Risk Analytics under Heightened Standards – Stress Testing and Model Risk Management.’
  • Power Breakfast Shark Tank Session where HEXANIKA™ will showcase their product.
  • Kiosk: HEXANIKA™ will be included as part of the FIS Compliance Solution kiosk and will get an opportunity to showcase the product to attendees who are from the financial, risk and technology domain.
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Elena Mesropyan
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Elena Mesropyan

Global Head of Content at Let's Talk Payments
Elena is a research professional with a background in social sciences and extensive experience in consumer behavior studies and marketing analytics. She is passionate about technologies enabling financial inclusion for underprivileged and vulnerable groups of the population around the world.
Elena Mesropyan
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