Technavio’s latest global anti money laundering software market report highlights the top four emerging trends that are expected to drive the market’s growth through 2020. Technavio defines an emerging trend as something that has potential for significant impact on the market and contributes to its growth or decline.

The top four emerging trends for the global anti money laundering software market according to Technavio enterprise and application research expert Navin Rajendra are:

Increasing use of predictive analytics

Service providers are applying an analytics approach to meet AML (anti money laundering) compliance. There are different methodologies applied by service providers to identify suspicious activity. However, some traditional approaches, such as linear regression analysis, generate false alerts that are not worth investigating. Predictive analytics enables enterprises to reduce the false alerts by 60%-70% and reduces the compliance cost of adopting AML software. Predictive analytics is also a better methodology than descriptive analytics because it can encode more information about an account or a customer’s activity.

Increasing demand for know your customer (KYC) analytics

Capital markets and banks in the retail sector have stringent regulatory requirements, which raise compliance costs and restrict fee-based revenue. Advances in technology enable banks and financial institutions to collect an enormous amount of data, but these organizations face multiple challenges in compiling the data to build strong relationships, improve return, and reduce risk. AML software enables banks to properly document, understand, and actively manage the flow of data across the organizations and its systems. It also enables banks to maintain customer relationship management (CRM) standards and comply with KYC norms.

Cloud-based AML solutions

The emergence of cloud-based solutions has enabled organizations to increase their efficiency and reduce the cost of deploying costlyIT infrastructure but many organizations are still analyzing the feasibility and relevance of cloud computing solutions in their IT operations.

“The cloud-based model for AML offers a pay-per-use model, which provides access to AML software anytime, anywhere, to multiple users. Such solutions are adopted more by small businesses because they are more cost-effective than on-premises solutions,” said Technavio lead analyst Navin. Although many financial enterprises have an increased understanding of the benefits of cloud-based AML solutions, concerns about security of data on the cloud are affecting the adoption of these solutions. Vendors such as EastNets and FICO TONBELLER have begun to offer their solutions through the cloud-based model to expand their services and enter new markets.

Increasing adoption of AML software by medium-sized enterprises

In the early 2000s, medium-sized financial enterprises had limited options while adopting solutions to ensure optimal business performance. This was because they did not require or could not afford all the features of enterprise-class software systems, limiting their options to freeware, low-end, or open-source solutions mainly focused on server or network monitoring. In the last few years, many medium-sized financial enterprises have become increasingly aware of the significance of having a solution that preserves their brand reputation and prevents money laundering activities and financial fraud. New AML vendors have entered the market with offerings that are positioned to capitalize on this trend. The combination of these new vendors’ pricing models and the capabilities and ease of management that their solutions offer, make these products appealing, especially to medium-sized enterprises.

Some of the top vendors covered in this report:

  • Oracle
  • RELX Group
  • Reuters
  • Safe Banking Systems
  • SAS

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Technavio analysts employ primary as well as secondary research techniques to ascertain the size and vendor landscape in a range of markets. Analysts obtain information using a combination of bottom-up and top-down approaches, besides using in-house market modeling tools and proprietary databases. They corroborate this data with the data obtained from various market participants and stakeholders across the value chain, including vendors, service providers, distributors, re-sellers, and end-users.

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