Is Regtech the New Fintech?

Dubbed as “the new fintech” by leading international consultancy firm Deloitte, regtech has phenomenally risen to prominence from near-obscurity, since 2015. But what exactly is regulatory technology (regtech)? And why is it set for an exponential growth in the days ahead?

Notwithstanding the risk of oversimplification, regtech is what it means straight on the face: using new technology for facilitating delivery of regulatory requirements. To borrow from Deloitte, it’s the technology that provides “nimble, configurable, easy to integrate, reliable, secure and cost-effective” solutions.

Origin of regtech

The term fintech was coined to explain the range of IT companies working in banking and financial services sector. The 2008 meltdown proved that regardless of increased investments in complex data management and mining systems, the financial services sector was unable to meet the demands of growing regulatory norms. Tech companies, smelling an opportunity, began offering new services related to data management, compliance and governance. Of the range of technology-focused services that came into being, regulatory compliance and reporting were considered among the most important.

Herein came regtech, which defines the union between regulation and technology to address the regulatory demands. Regtech, as of now, largely includes automating manual processes, simplifying and improving data quality, offering a holistic view of the data for analysis, and generating reports for regulators and internal consumption.

What regtech offers

Regtech typically offers the following four functions.

Agility: Efficiently decoupling and organising cluttered datasets via the ETL (extract, transfer, load) process.

Speed: Generating and configuring reports from standardized data.

Integration: Collating reports with the shortest possible time to get a solution framework up and running.

Analysis: Intelligent mining of the existing datasets, unlocking their true potential by presenting it as simply as possible.

Agility, undeniably, is the key difference between regtech and conventional business solutions. The latter offers a robust design forged to deliver specific requirements. Nonetheless, they are largely inflexible, calling for enhanced coding time to time. It leads to more complications in the process, involving added workforce and cost.

Regtech companies, on their part, help firms to automate the regular tasks and reduce the operational risks involved in reporting and compliance obligations. Regtech helps reduce costs, improves security, enhances flexibility, and greatly reduces the time required for completion.

Where is regtech headed?

Regtech has thrown up considerable opportunities. Regulations will only increase in the days ahead, fuelled by the demand to monitor and report data and operational processes. The financial sector is opening up to partner and support regtech startups to address this growing demand of regulations and compliance, as well as help in spreading the adoption of this technology for governance and payments.

Besides, regtech is almost entirely cloud-based, and it will open more avenues for startups to come up with these solutions. This, in turn, will reduce the entry barrier and help spread regtech applications across the globe. Financial institutions all over the world are now intent to help regtech companies that may largely resolve the issues of operating from multiple locations and protocols of each market.

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