Globally, there are a plethora of professional services available for people, but very few are as important as banking. Banks play a very crucial role in the upkeep of global economic health, making them a powerful platform for society to avail any kind of financial service. But as Peter Parker’s (AKA Spiderman) Uncle Ben aptly said, "With great powers come great responsibilities". The
Banking being such a crucial form of financial service, banks regularly have to deal with a lot of regulatory compliance norms set up by the government or central banking agencies on a local/national or even on an international level.
The significance of meeting regulatory compliance is best understood by the large number of penalties that were imposed by the Reserve Bank of India (RBI) on financial institutions in 2021. By July, at least 14 Banks and non-banking financial companies (NBFCs) were fined, and the trend continued throughout the year. The cumulative fines ran into the crores, creating revenue and operational pressures for financial players.
But compliance is not easy. Apart from the numerous compliance and regulatory rules that a bank needs to abide by, what is more challenging is that the norms keep on changing rapidly. Thus staying attuned to an evolving regulatory landscape and abiding by it is easier said than done.
Use of advanced technologies can greatly reduce the burden for banks and financial institutions to achieve a healthy compliance track record.
Robotic Process Automation (RPA)
To achieve a good compliance record, any bank needs to have a lot of data of their operations upon which they can file compliance reports. The majority of this task is simply maintaining a detailed datasheet, and RPA is a technology that can help to maintain a detailed datasheet without the use of any manpower, in very little time and with great accuracy.
Artificial Intelligence (AI) and Machine Learning (ML)
Artificial Intelligence and Machine Learning are technologies that can be easily considered as the future of almost all digital technologies. For instance, AI can be gainfully deployed to transform the customer applications process, bringing it down from days to under a minute. Similarly, ML can be used for overall large data sets to expedite decision making, which is otherwise done manually. Both these technologies can meet compliance norms with high levels of accuracy, helping banks save time, effort and money.
NLP, Voice and Facial Recognition to tackle fraud
Natural Language Processing, voice and facial recognition, can help financial institutions to heavily curb fraudulent transactions and frauds. When a financial institution has these tools, they can easily use them to keep track of any suspicious financial activity among its user base and the technologies can help in pinpointing any such occurrence with great accuracy. This can greatly help in meeting safety compliance norms set up by the regulatory bodies to keep customers safe from banking frauds.
Big Data optimization
Yet another lever for banks can be to use Big Data Optimization to expedite decision making by quickly looking up through large data sets of information. Data is omnipresent but what and how banks use these large volumes of data to maintain compliance while also improving the offerings and experience of their customers will be critical in the days to come.
A big hindrance to adoption of fintech and tech solutions that help with regulatory activities is compliance. Banks follow strict regulatory guidelines and often piecemeal technology solutions are unable to help banks in that direction. A crucial component of banking infrastructure overhaul entails leveraging cryptographic solutions where all sensitive information is stored as per regulatory standards for audit trails and it can also be shared in a secure manner.
With many more such smart technologies and due to the availability of so much data, it has become imperative for any financial institution to leverage these technologies. It is also important for banks to pair up the right technologies in their operations to make it easier for them to focus on their core in an uber-competitive financial landscape.
Ankit Ratan is the Co-founder and CEO of Signzy.