The term ‘RegTech’ is a fairly new addition to many of our vocabularies. We might have heard it thrown around as a buzzword, or maybe we recognise it when some compare it with well-known FinTech, but what is RegTech exactly - and how did it come to exist?
RegTech - Regulatory Technology if you really spell it out - refers to technological solutions that facilitate the digitised and easy delivery of regulatory and compliance requirements for businesses. Unlike FinTech, RegTech is not limited to the financial services industry. Through the use of cloud computing, Software-as-a-Service (SaaS) and soon to be Machine Learning, RegTech companies are impacting the compliance, governance and risk management requirements for businesses that differ vastly in nature.
The key features of RegTech and how we have utilised this technology within Alyne is how it enables different types of businesses to streamline and improve their regulatory process in a way that is easily configurable, content-rich, accurate and cost-effective.
How did it come about?
RegTech was created from a growing demand in the financial services industry, which saw banks witness vast and laborious amounts of data to secure and report on, heightened costs and a rising level of regulations to comply with - fueling the need for a more efficient and digital technology to facilitate it all.
The 2008 global financial crisis represented a significant shift that split the glacier between FinTech and the developments of RegTech. The two should not be seen as one and the same, and as the paradigm has shifted, it’s clear to see that each is based around uniquely different driving forces. Namely, RegTech being a response to the exponential growth of compliance and regulatory costs - and having the ability to be applied to many different types of businesses - and FinTech, remaining inherently focussed on financial services.
We love how they CFA Institute has captured the essence of RegTech: “We argue that the true potential of RegTech lies in its ability to effect a profound transition from a “know your customer” (KYC) to a “know your data” (KYD) approach—underpinned by efficient and effective processes for the collection, formatting, management, and analysis of reported data, accompanied by a fundamentally data-centric mindset.”
The future - and what's next for RegTech.
As data protection laws become stronger and sheer amounts of data to deal with becomes problematic in paper-based processes - the need for fully digitised and automated solutions will increase further. The future will demand further evolution of RegTech as the market moves towards a data-centric KYD approach. RegTech technology will continue to improve and provide even more intelligent solutions to the increasing costs of compliance, the automation of processes - which mitigate business risk, and the ability for businesses to work smarter and not harder, in protecting their most valuable data.