BOSTON, Sept. 20, 2018 /PRNewswire-PRWeb/ — Financial authorities are at a tipping point in embracing a range of new technologies like chatbots and artificial intelligence (AI) to help them tame the surge of data flowing from the digitization of the banking and finance sectors, giving them clearer insights into emerging risks and trends.

A new report from BFA’s RegTech for Regulators Accelerator (R2A) initiative describes how financial authorities are adopting the same kinds of technology that banks and other institutions are already utilizing in their own practices. The paper argues that central banks and financial authorities are prepared to use these new approaches, termed RegTech for Regulators or RegTech2, to tame the data wave and use it for far superior analysis, oversight, and policymaking.

R2A has been working with authorities in Mexico and the Philippines to prototype new RegTech2 and supervisory technology (SupTech) solutions that have the potential to dramatically improve the way central banks and other financial authorities receive, store, process, analyze, and use data.

The central bank of the Philippines, Bangko Sentral ng Pilipinas (BSP), worked with R2A on an application programming interface (API) to receive data streams directly from commercial banks that then form the basis of regulatory reports, mitigating the risk of human error or duplication inherent in the current approach, which relies on manual data inputs.

BSP also collaborated with R2A on a chatbot prototype to answer consumer complaints, using a triage approach to select those that could be handled through an automated response system that can both resolve complaints as well as redirect callers with concerns that are best addressed – at least initially – through the supervised institution. This system can not only save time and effort in coping with often misdirected complaints, it will also enable BSP to review complaints as a red flag for unlawful behavior by the supervised institution.

RegTech2 approaches could also revolutionize the fight against money laundering and terrorist financing. R2A’s work with Mexico’s Comisión Nacional Bancaria y de Valores (CNBV) showed how anti-money laundering (AML) compliance data can be collected and used more effectively. The new approach relies on enhanced machine learning analysis and smart dashboards to produce a range of alerts that otherwise might not have been triggered.

In the past, financial authorities have relied on basic spreadsheet software and other off-the-shelf solutions to try to cope with mounting data flows and the growing sophistication of information from supervised institutions. R2A’s work in the Philippines and Mexico showed the value of regulators instead collaborating with financial technology (fintech) companies to design and introduce RegTech2 models that offer far greater capabilities and effectiveness.

The white paper (available at https://www.r2accelerator.org/publications/) also sounds a cautionary note, suggesting that while RegTech2 offers clear benefits to regulators in gaining virtual “superpowers” in data handling and analysis, they need a clear strategy to ensure they also avoid the possible pitfalls. These include an over-reliance on digitized approaches over human judgment that could also “de-skill” staff.

Overall, however, the prototypes showcased in BFA’s R2A white paper demonstrate that RegTech2 approaches can help financial authorities not only catch up with the sectors they oversee in terms of data handling and processing, they can use this next generation of tools to imagine and begin setting policies for the future.

In addition to the white paper, the R2A program has also published a process paper, central bank survey, prototype videos, a vendor database, and a global RegTech2 solutions tracker on its website at http://www.R2Accelerator.org.

The R2A initiative is funded by the Bill & Melinda Gates Foundation, Omidyar Network, and the U.S. Agency for International Development and is managed by global consultancy BFA with Rockefeller Philanthropy Advisors as fiscal sponsor.

SOURCE BFA