Regtech in India: The need of the hour?
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Be it the boom in the start-up ecosystem or push from the government to go digital or the increasing presence of international IT companies in India, all of this has led to the rising need for RegTech in India. RegTech or Regulatory Technology refers to the digitally enabled management of filings, compliances as well as monitoring of policies.
The rollout of GST and the requirement for all companies to do their filings online have turned the focus again on RegTech.
A Huge Business Requirement in India
With the number of investments and acquisitions rising in India, regulatory technology needs to be implemented by all companies. “It is going to be very important. When you see a lot of private equity investments, there is a huge business requirement to be compliant. Globally, US stock exchange listed companies have paid heavy fines because their subsidiaries have compliance issues. Some of these penalties have even led to the CEO of the company being affected and the stock price of the company falling drastically. So, for domestic and large companies it is important to implement RegTech. Currently, only the big four or established firms pay attention to RegTech,” said Sanjay Jesrani, CEO, GoNorth Ventures.
Fintech Giving the Required Push to RegTech
While there have been speculations around the world about RegTech being the new Fintech, the truth lies in the fact that the growth of the latter just brings about the need of the former. “From credit card fraud detection to aiding peer-to-peer lending platforms in detecting a pattern for their users, Fintech is making way for RegTech,” said Jesrani.
Government’s Aim To Fulfill Single-window Clearance
With the focus on going digital, companies still have to fill up a hoard of forms while starting up and RegTech will help in speeding things up. “Today, to open a company in India one needs to submit at least 45 different documents. If a foreign investor is putting money into your company, heavy documentation is required again. The aim of RegTech is to automate this entire process and also update the users on what forms they need to fill. Today, what the government needs is a single-window clearance platform. There are too many pieces to a transaction and too many different authorities that one has to approach. RegTech will make single-window clearance possible,” said Shashank Bijapur, a Harvard Law School alumni and former Wall Street lawyer, who has co-founded Spotdraft.
Risk-Mitigation and the Involvement of AI
Where there’s automation, there’s AI. Bijapur at Spotdraft is currently testing a RegTech piece on his platform. “We are testing the automation of the regulatory filings and notifications. Once you upload the documents of a transaction online, the platform will gage what filings are required. This basically helps in risk-mitigation and spares a business owner from facing any penalty,” said Bijapur.
The advancements in AI is helping in this process. “We are creating an AI and Machine Learning platform that can go through your transactions and put your business on autopilot,” added Bijapur.
Vikrant Varshney, Chief of Risk Advisory Board at Risk Resources, commenting on RegTech said, “In the short term, RegTech will help firms automate the mundane compliance tasks and reduce operational risks in meeting reporting obligations. In the longer term, it will empower compliance functions to make informed risk choices, based on data-led insight and how it mitigates and manages those risks.”
Talking about how it’s not yet a familiar concept in India, Vikrant added, “REGTECH as category hasn’t fully evolved as a Start-up category in India and we still see exclamatory faces when this category is announced for discussion in most start-up events.”