background image background image background image

Why regtech is key to scalability in financial services

Thought Leadership 6 minutes to read

Summary:  The new era of regulatory requirements triggered by the global financial crisis presents the financial industry with many challenges. The most efficient way to satisfy these requirements is via regulatory technology and here, Saxo Bank is at the cutting edge of progress.


Regulation and technology are two of the most important mega-trends that have shifted the tectonic plates of global finance. In the wake of the financial crisis, authorities across the globe have introduced a wave of new, comprehensive and more prudent regulation. 

Banks must either adapt their operations and ride this wave of new regulation or try to patch together existing systems and workflows. The latter could work from a compliance point of view but the costs will inevitably pile up and create a gridlock for any global organisation. MiFID II, GDPR in Europe and increasing KYC and AML obligations across jurisdictions are just a few examples of what has kept financial institutions busy in recent years.   

These challenges are in essence why regtech (regulatory technology) has become the new frontier in the financial sector. 

Where fintech is often used to describe solutions endeavoring to fundamentally revolutionise financial services, regtech leverages technology to meet complex regulatory obligations more effectively and hereby enhance risk management and strengthen compliance. Within a few years, regtech will be an integral part of the value chain from the onboarding process to surveillance of financial crime to regulatory reporting. 

Not constrained to the financial sector solely, regtech has the potential to greatly impact a variety of industries. Nevertheless, with the financial industry being among the most regulated sectors in the world, this makes for a natural breeding ground for emerging and innovative regtech solutions.

Saxo Bank is best described as a technology company with a banking license and technology has been the very core of our business model since the early days of the internet. We have taken our approach to trading and investment technology, applying it to the bank’s risk management and compliance framework. 

Conventionally, these areas are perceived as cost centers in the business models of most banks. At Saxo Bank, we have chosen a different path of leveraging technology and consequently transforming traditional cost centres into revenue drivers and competitive advantages. 

This is also a key difference between simply providing ‘Software as a Service’ to participants in the financial industry and delivering ‘Banking-As-a-Service’ like Saxo Bank provides to more than 120 partners. A decisive factor in ‘Banking as a Service’ is not only to have global capital markets access and trading and investment infrastructure, but to underpin the offering with efficient regtech and risk management solutions. As such, a robo-advisor for instance, can focus completely on delivering a stellar client experience and asset allocation while a partner such as Saxo Bank not only provides access to global capital markets but also systems for regulatory reporting, financial crime detection and risk management. 

Financial institutions that over time fail to utilise technology to engage effectively with increasing regulation neglect the changing environment around them. Attempting to meet the obligations set forth by regulators with manual processes make an organisation prone to human errors and slippage in flows between key functions and departments.

In effect, regtech becomes the magic ingredient that enables scalability for financial institutions in an environment of increasing regulatory requirements. 

At Saxo Bank, we are deploying new technologies such as machine learning and artificial intelligence to our regulatory framework e.g. to enhance financial crime detection procedures and automatically scan through thousands of transactions. Through machine learning, the algorithm is constantly improving and finding new patterns that would be difficult (or time-consuming) to do manually.  

An important factor for any financial institution with regards to regtech is to collaborate with external partners and vendors. Saxo Bank’s regtech framework is built on the foundations of several external data vendors and partners whose systems and knowledge we leverage in our own offering. 

Regtech is an important part of Saxo Bank’s future plans to explore and leverage the opportunities that comes with new technology while being compliant. Nonetheless, digitisation alone cannot solve every regulatory requirement and some processes still need a human hand. With intelligent technology we can enrich the basis for decision making by our employees around the world. 

Better use of regtech solutions is necessary for any financial institution in order to strengthen the value chain and scale across multiple markets and jurisdictions. 

Disclaimer

The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
Full disclaimer (https://www.home.saxo/legal/disclaimer/saxo-disclaimer)
Full disclaimer (https://www.home.saxo/legal/saxoselect-disclaimer/disclaimer)

Saxo Bank A/S (Headquarters)
Philip Heymans Alle 15
2900
Hellerup
Denmark

Contact Saxo

Select region

International
International

Trade responsibly
All trading carries risk. Read more. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more

This website can be accessed worldwide however the information on the website is related to Saxo Bank A/S and is not specific to any entity of Saxo Bank Group. All clients will directly engage with Saxo Bank A/S and all client agreements will be entered into with Saxo Bank A/S and thus governed by Danish Law.

Apple and the Apple logo are trademarks of Apple Inc, registered in the US and other countries and regions. App Store is a service mark of Apple Inc. Google Play and the Google Play logo are trademarks of Google LLC.