What is RegTech and how it relates to FinTech? What is a RegTech company? — definitions not only for tech freaks
It seems that with the term “FinTech” many people from do not have major difficulties. FinTech company or service is properly categorized. However, we still encounter misunderstanding when we introduce ourselves as a “RegTech company” (we, Transparent Data).
And basically, it is not surprising.
RegTech, or Regulatory Technology, does not even have its official site on Wikipedia in many languages except for English. That is why we are in a hurry in today’s article with explanations.
What is RegTech? Definition
The term "RegTech" is an acronym for English Regulatory Technology.
Like FinTech, RegTech stands for modern technological solutions whose task is to improve the operation of mostly financial services (banks, insurance providers, etc.). RegTech, however, applies to even narrower specialization in the financial sector than FinTech — solutions optimizing banking processes to meet regulatory requirements.
Ensuring compliance with the current regulations is the fundamental role of RegTech solutions. The others usually include streamlining control and verification processes and reducing the costs of maintaining procedures and systems.
In other words, thanks to RegTech solutions and products, financial institutions can easily, faster and cheaper collect and analyze data to which they are required to verify (by applicable law).
What is more, regulatory innovations are not only gaining in banks, but in general, in the economy and society. RegTech supports regulations whose aim is to increase the transparency of financial operations and prevent money laundering (the so-called AML - Anti-Money Laundering).
A good example of such a top-down obligation is, for example, an EU regulation requiring banks to verify PEP lists (politically exposed persons), which include presidents, prime ministers, deputies, and ministers along with their families.
RegTech is not a new FinTech. RegTech solutions are a sort of more-classified FinTech subcategory.
RegTech - specific examples
An example of RegTech company:
A typical company from RegTech sector is a supplier of business, register and economic data from many sources so that the bank receives in one coherent system all the information it needs to verify a given company or PEP. Such a company operating in the RegTech industry, is e.g. us, Transparent Data :)
An example of RegTech solution:
An example of RegTech solution is a dedicated API designed for specific needs of a given financial institution.
"API for specific needs", so API that provides to the bank's internal system only information selected by the bank (information from state registers, selected foreign sources, and websites), integrates this data into one common database and supplements the bank system with this already verified information.
Thanks to such an API, verification of a single company that wants to apply for a loan in a given bank lasts 15 minutes, not 48 hours. In this way, not only the bank gains (faster processes, offloading human resources) but also the bank's client himself - he waits for the decision only 15 minutes instead of 48 hours.
