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Raj Chaudhary

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Raj Chaudhary - Atos Global

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Regtech. Yes! It exists.

30 October 2017  |  5925 views  |  0

Fintech has been a talk in town since long now. Regtech, on the other hand is still being discussed a fad or future. It’s time. Regtech, slowly but steadily is becoming the BUZZWORD in regulatory compliance. Regtech was received well sometimes with open hands and sometimes seen with uncertainty. Here we discuss Regtech, its evolution and landscape to provide an unblemished aspect.

In the highly competitive world of financial services, Fintech and Insurtech have marked their presence already. Regtech may have been realized late; however increasing regulatory demands are making Regtech a highly reliable technology solution for the compliance landscape. Many industry experts believe a promising future for Regtech. According to one of the whitepapers published by Holland Fintech: “Fintech is creating a new source of competition for banks, but innovative new technologies can also underpin their response to new customer requirements and new market entrants – and the much-hyped subset of Fintech, RegTech, could hold the key to mastering the regulatory burden, simplifying and speeding on boarding, and turning every new and existing customer into a recommender, rather than a detractor.”

Complying with regulations in financial service has always been a tedious task. To address these issues innovations in financial services in recent times have been a boon. These innovative solutions have barely touched upon compliance requirement and are still evolving. Various questions such as which technology offers the most, how to meet the expectations of customers, how to make sure the technology used will be controlled are proving the lack of knowledge on regulation compliances. For all those uncertainties, Regtech could be the answer.

What is Regtech?

Industry experts and consulting firms such as ‘Moorhouse’, ‘Kaleida’, ‘Wired UK’ have often found stating in their respective articles that the term ‘Regtech’ was coined by UK’s Financial Conduct Authority (FCA) in 2015. The FCA have published a white-paper where it stated: “RegTech is a subset of Fintech that focuses on technologies that may facilitate the delivery of regulatory requirements more efficiently and effectively than existing capabilities.”

The International Regtech Association (IRTA) was incorporated in 2017. The IRTA, a non-profit organization is a community of talented, agile and skilled thinkers who are determined to innovate and establish Regtech for the coming years. 

Regtech is designed to simplify the process of achieving regulatory compliance and to address regulatory related challenges.

Evolution of Regtech

The scope for technology to improve regulatory compliances started to come into focus after the 2007-08 financial crises. Following the exposure of many shortfalls in compliance practices, banks and market institutions bore heavy fines and political censure. A complete overhaul of regulatory regimes inevitably followed, resulting in more and more complex regulatory reporting requirements.

In parallel, other macro factors also posed a threat to compliance. Hacking, data breaches, cyber hacks and money laundering have remained a challenge for security innovations and technologies.

These all led to give rise to a technology that can empower financial institutions to act in accordance with regulation effectively and efficiently. Regtech was born. Regtech is helping organizations with streamlining risk management and regulatory issues and challenges. There are many benefits such as Cost savings, Evading Fines realised by the organizations.

Benefit 1: Regtech drives down the cost by standardising compliance process through the use of automated mapping of regulatory risks.

Benefit 2: Regtech utilises more sustainable solutions which can provides greater flexibility and help organizations to move away from older rigid process.

Benefit 3: Regtech uses advanced analytics which helps organizations to predict risks and challenges in advance and  

Regxit

A recent trend of regtech start-ups exiting from the market is being observed. This could one of the reasons the Regtech is not gaining popularity as Fintech and Insurtech. Deeper analysis reveals a reason which was totally unsurprising.

According to a report from CB Insights, in 2016 alone, there were 30 Regtech exits, including 29 M&A transactions and 1 IPO. The following figure depicts annual Regtech M&A and IPO since 2012.

Regxit is proving to be one of the glitches in entry of the Regtech start-ups. However, the thought process of the market has been changed considerably since 2014. According to a report from CB insights, Regtech deals saw a 48% increase from 64 in 2013 to 95 in 2014 and funding spiked 115% from $403M in 2013 to a record $867M in 2014. Funding was dipped in 2015 by 3%. It dipped from $757M in 2015 to $732M in 2016. These stats prove that Regtech has come to survive and stay for long.

Looking Forward

Financial market participants may be new to Regtech. However, if they remove timeworn internal cultural and organizational barriers, they have a lot of scope to improve in regulation. Rather than focussing on older point to point solutions for regulatory compliant, firms must develop strategy and road map for Regtech.

Yes! It exists. Regtech exists.

TagsRisk & regulationFinancial inclusion

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Regtech. Yes! It exists.

30 October 2017  |  5925 views  |  0 comments | recomends Recommends 0 TagsRisk & regulationFinancial inclusionGroupFintech

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job title Associate Manager - Fintech Research
location Pune
member since 2017
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I am responsible for mapping Fintech to the Atos GFS industry solution portfolio. Providing Market Intelligence on FinTech (Blockchain, Bitcoin, Cryptocurrency, Chatbots, AI etc.) industry. Resp...

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