Charles Potts: The rise of regtech

hands using tablet
By Charles Potts, ICBA

A growing number of community banks are exploring regtech solutions to address their regulatory and compliance challenges. But what is regtech, and why is it important?

Regtech, short for regulatory technology, uses information technology to enhance regulatory processes by improving the efficiency and effectiveness of monitoring, reporting, compliance and other requirements. Once the domain expertise of fintechs, regtech is making headway into legacy companies thanks to today’s enhanced computing capabilities and capacities.

Regtech helps community banks attain faster and more robust data analytics, instant access to performance information and real-time results, making it a valuable strategic tool as they reassess and reprioritize in light of COVID-19. And by incorporating data analytics (see page 21), artificial intelligence (AI) and machine learning into the mix, community banks can identify customer trends and use predictive analytics to determine which customers might be the most receptive to new products and services, saving time and potentially increasing revenue.

To further promote innovation, regulatory bodies are creating fintech “sandboxes,” or data sources and repositories for experimentation. Sandboxes enable community bankers to become familiar with new products and test proof-of-concepts with limited risk and little investment.

Regtech holds inherent possibilities and opportunities for community banks to streamline processes and increase revenue. As you begin the process of assessing where your community bank is today and planning for the future, here are three things to keep in mind:

  1. Identify where silos around legacy regulations, compliance and risk management exist in your bank and consider how you can consolidate these functions around unifying technology.
  2. Tie all potential changes to a forward-looking business strategy, and ensure your strategy dovetails with your bank’s risk management and compliance practices. For example, if you’re launching a new lending program, consider exploring a know-your-customer (KYC) platform.
  3. Consider how these capabilities will help your community bank scale more efficiently.

The Paycheck Protection Program (PPP) created opportunities for many community banks to institute enhanced KYC solutions, along with compliance and underwriting capabilities. In bridging the technology chasm to implement PPP, community banks embraced capabilities that may have broader applications across the institution.

As you forge the path ahead, reach out to your ICBA member relations officer and regulator with your concerns and challenges around consolidating compliance technologies to make guidance and regulatory oversight more effective.

Now is also an excellent time to reach out to ICBA’s ThinkTECH Accelerator alumni, as well as our Preferred Service Providers (PSPs), many of which have expertise in regtech and other fintech applications and would welcome the opportunity to partner with your community bank.

Charles Potts ( is ICBA senior vice president and chief innovation officer