From Fiction To Reality To Necessity: Regtech's World Takeover

It was about two years ago that articles about regtech first began hitting newsstands. The financial world had been undergoing huge waves of new laws for about a decade, complex regulations usually accompanied by high penalties for non-compliance. The idea of these regulations was, generally, to make sure supervisory authorities had accurate documentation with which to ensure a safer marketplace for everyone, but companies faced practical drawbacks immediately: traditional tools simply could not keep up with new reporting demands, and so the overall costs of compliance were rising dramatically.

Thus, the scene was ideal for regulatory technology—regtech—to emerge. And when it did, interest was immediate and expectations were huge. That's because regtech proposed to use new technologies to automate as many of these compliance tasks as possible, from analyzing data to compiling, verifying, and submitting reports. It also promised, on a deeper level, to help organizations change their relationship with data, bringing compliance-oriented approaches into day-to-day strategy and management processes.

All of this is exciting—but what is the status of regtech now, in 2019?

Real use and really useful

As regtech matures, we can see its advantages more broadly. While spanning a wide range of technologies, angles, and specializations, regtech products mostly promise the same things: efficiency (in terms of easier management and time savings), cost reduction, risk anticipation, security, and better reactivity. Instead of combing through circulars and regulations to see which ones apply to a new system, tools now exist to search and recommend that information (my colleagues have recently been working on technology that does just this for the EU's DAC 6 regulation / MDR). Or, complex reports can be generated and sent to authorities with a single click, with the assurance that they comply with both older regulations and new directives.

Put another way, regtech is beginning to really meet the promises made in articles from a couple of years ago. And companies have felt the difference, in terms of freeing up their human workforces to focus more on value-adding tasks rather than on menial checks.

Proliferation

When the first fintech subsectors began to emergethink of regtech, insurtech, robo-advisors, and so oneach one seemed like a niche product for a niche market. As more startups, investments, developments, and technologies have broadened the scene...