While it seems as though society is locked into the economic conditions and system that’s been built around us over the last few centuries, it may be surprising to some that over two and half billion people are shut out of this system.
This is known as ‘underbanked,’ or simply ‘unbanked.’
This could be because of any number of reasons, including poor credit history, lack of the right papers to open an account, or simply because they haven’t bothered to open one. This means there’s no availability of credit, no financial security, and no access to a home or the job market; which, of course, can be problematic.
However, a new idea known as ‘RegTech’ seems to be taking off around the world, so what is it, and why so many experts believe this is going to be the next big thing in banking?
What is RegTech?
RegTech simply stands for ‘Regulatory Technology.’ As it simply suggests, this refers to the regulations of new technologies and concepts, but that is a very simple description.
In essence, RegTech is designed to enable regulations to be made quickly and cost-effectively when new technologies are introduced. This includes data processing through platforms like social media, new facial recognition technologies, and new biometric hardware.
What Does This Have to Do with Banking?
Take into consideration the information we shared in the introduction. Over half the world’s population is unable to job the current economy or have a part in it. This, as proven by history, is the world’s poverty line, and suffering has been caused for decades due to this inability to move above the line.
However, using the new technologies that can process data is a fast, accurate and cost-effective manner, more and more people could be given the opportunity to access the economy we all know; especially in lesser developed areas.
This is because instead of a bank assistant making the judgments on someone’s character when it comes to things like getting credit, a computer can make the calculations based on their internet usage, biometrics, social media activity, and other forms of internet filter.
Since this risk is calculated on an automatic scale, this is ideal for banks since the risks can be calculated on an individual basis; which is then only improved when you start implementing technologies such as machine learning and artificial intelligence.
Will It Take Off?
Many critics and experts in the industry are hailing RegTech as the next ‘FinTech’, an idea and banking movement that is already shaking the financial establishment and traditional banking systems.
With these two services combined, the banking world as we know it could be revolutionized beyond belief, perhaps even into something that we’ve never seen before.
Only time will tell whether RegTech, FinTech, and any other kind of tech change the way the banking system runs and operates. There are pros and cons to both concepts, but with companies quickly implementing the technology already, it might not be long before we see changes taking place.