How is Regtech Enabling More Robust Data Protection and Privacy Compliance?

2024 is proving another standout year for the regulatory space, finding itself under the spotlight, for better and worse reasons. This month, The Fintech Times will look at some of the biggest issues regarding compliance and financial rules, as well as the solutions hoping to ease the compliance journey for firms and make the fintech world fairer and safer. The further we’ve delved into the world of regulation and compliance, the clearer it has become that there are a whole host of challenges for financial institutions to contend with. When it comes to cybersecurity, the topic of data protection and privacy is arguably one of the most important. While it is imperative that firms keep data safe to ensure compliance with local regulators, it is also important to ensure that they retain the trust of their existing and prospective customers. With this in mind, we set out to find out how regtech is enabling more robust data protection and privacy compliance. “Regulatory technology plays a pivotal role in bolstering data protection and privacy compliance,” explains Henry Balani, global head of industry and regulatory affairs at Encompass Corporation. “By implementing advanced technologies such as Corporate Digital Identity (CDI) and AI, institutions can better manage complex data sets by automating compliance processes, improving data accuracy, and facilitating real-time monitoring to meet regulatory standards.”

The power of automation

Remonda Kirketerp-Møller, CEO of Muinmos, a Danish regtech firm, also believes that AI-based regtech solutions could hold the key to best protecting sensitive data: “Regtech is revolutionising data protection and privacy compliance by automating and streamlining processes related to regulatory requirements like GDPR and other privacy laws. “Through advanced technologies such as AI and machine learning, regtech solutions can identify, classify, and protect sensitive data across systems, ensuring that financial institutions comply with data protection regulations in real-time. “By automating risk assessments and ensuring encryption and secure data management, regtech not only reduces the chances of human error but also enables continuous monitoring for data breaches, thereby safeguarding privacy in an increasingly complex digital landscape. Many regtech companies obtain ISO certifications to strengthen their GDPR alignment.”

Regtech in the UK

New regulatory rules in the UK have bolstered the importance of regtech solutions says Mike Ward, executive chairman at data intelligence fintech Armalytix. “Regtech is becoming more and more important for data protection and privacy compliance, particularly in light of new regulations like the FCA’s Consumer Duty rules. These tools are enabling firms to better understand and protect their customers’ data, while also meeting stringent and evolving regulatory requirements. “One of the advantages of regtech is being able to process and analyse vast amounts of data quickly and efficiently, which is important for firms as it gives them a comprehensive view of each customer’s financial situation, as required by the Consumer Duty rules. By leveraging advanced analytics and machine learning, regtech solutions can identify patterns and potential risks in data handling that might otherwise go unnoticed.”

‘Designed with compliance in mind’

“In today’s landscape, all service providers, whether regtech or otherwise, place a significant emphasis on security,” adds Rokas Muraška, chief security and risk officer at payment processor PAYSTRAX. “They consistently adhere to established security best practices and industry standards. This includes ensuring that data is encrypted both in transit and at rest, providing robust protection against unauthorised access. “Most modern solutions are designed with compliance in mind, meeting stringent regulatory requirements such as GDPR and PCI DSS. Additionally, many providers are proactively preparing for emerging regulations – DORA, to ensure they remain ahead of evolving security and compliance challenges.”

Overcoming outdated processes

Finally, Aaron Holmes, CEO of Kani Payments, the data reconciliation and reporting platform, breaks down the archaic nature of existing reporting processes for many firms. “In a world where fintech innovation is rewriting the rules of finance, why are so many companies still shackled to outdated reporting processes? Our recent survey of UK fintech and payments companies revealed a surprising truth: 53 per cent still rely on spreadsheets to manage their regulatory reports. Even more concerning is that 56 per cent say they spend too much time managing repetitive data tasks. “Time-consuming tasks like data aggregation, validation and formatting quickly erode a company’s efficiency and scalability. But it’s not just the inefficiency—it’s the opportunity cost. Every hour spent on easily automated jobs is an hour lost driving business growth. In an industry where time for innovation is paramount to success, manual and inefficient reporting is an invisible anchor. It’s time for fintechs to break free.” Holmes also believes that the key lies in automation: “Success belongs to those who adopt flexible, cloud-based and automated reporting tools. By meeting complex and evolving regulatory demands without sacrificing speed or accuracy, fintechs can refocus on what matters most—scaling their business, enhancing customer experiences and shaping the future of finance.”