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IBM and Thomson Reuters have teamed up to launch a new AI-powered regtech solution to help banks better navigate growing regulatory requirements, per a press release.

Global Regtech Investment
Business Insider Intelligence

The solution will be delivered from the IBM Cloud that features real-time financial services data from thousands of content sources. The new solution aims to help compliance professionals keep up with regulatory changes, manage risk, and reduce the overall cost of compliance.

Here's what it means: The new feature adds to existing regtech offerings from the partners, providing banks with a more thorough solution to navigate regulatory compliance.

  • IBM and Thomson Reuters each offer regtech solutions already. Thomson Reuters delivers a view of the global regulatory environment using trusted intelligence, while IBM's existing solutions include IBM OpenPages with Watson, which provides visibility into pending regulatory changes. The latest launch will bring a new level of insight and intelligence to regulatory compliance, according to Alistair Rennie, general manager at Watson Financial Services, IBM. And considering IBM works with 97% of the world's largest banks, the new solution could reach a large client base.
  • The need for regtech solutions will only increase in the future. Financial Institutions (FIs) will face 300 million new regulations by 2020, per the release. Complying with all of those regulations is time consuming, especially as FIs still often rely on manual processes, forcing compliance staff to read through lengthy regulatory information. However, the new solution eliminates the need for manual work by using AI to allow banks to integrate their risk data using global coverage of more than 900 regulatory bodies and 2,500 collections of regulatory and legislative materials.

The bigger picture: Banks are being offered regtech solutions by a range of companies, and IBM and Thomson Reuters' partnership may be a threat to some regtech startups.

Regtech funding has never been higher — and IBM and Thomson Reuters have established trust with customers, which can bring more clients to their solution. Regtech funding reached new highs in 2018 and more than doubled from $1.9 billion in 2017 to $4.5 billion. This is likely linked to banks' rising interest in digitally-enabled solutions as new regulations are demanding to keep up with.

However, as IBM and Thomson Reuters team up to strengthen their regtech capabilities, they might be able to snap up customers who would otherwise have turned to a startup for compliance regtech solutions, as the two players already have established relationships with their large customer bases.

On the other hand, having two big players team up on a regtech venture may also give the regtech space more visibility and legitimacy, which could help get more banks on board with using tech-enabled compliance solutions, rather than their own manual processes.

Here's an industry opinion, as told to Business Insider Intelligence:

"Staying up-to-date on changing regulations across hundreds of jurisdictions is time consuming and cumbersome for financial institutions so this is a great initiative. This partnership aligns with the future of the industry towards dynamic regulatory and compliance analytics." Gabrielle Haddad, cofounder and COO at Sigma Ratings

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