What Is Regtech? A Quick Guide

Recently, we took a look into the emerging insurtech market. Now we want to look at another emerging fintech sector, RegTech.

Regtech, which stands for Regulatory Technology, refers to the use of information technology to optimize and actualize regulatory processes. It’s helping all industries that are regulated by the government interact with their customers better, and improve their internal processes.

What is RegTech though, and how can we expect to see it develop? And crucially, what if any opportunities are there for businesses and entrepreneurs in the RegTech space?

In this article we attempt to address some of these questions.

RegTech In A Snapshot

In the early to mid 2010’s, RegTech was born out of the FinTech market. It was a specific technological niche aimed at helping financial agencies comply with regulation better. In 2015, a report by the GCSA (UK Government Chief Scientific Adviser) stated that "FinTech has the potential to be applied to regulation and compliance to make financial regulation and reporting more transparent, efficient and effective – creating new mechanisms for regulatory technology, RegTech”.

Since then, RegTech has spread to other industries. As long as there is a B2C and a regulatory component to a market, RegTech can help companies comply better and faster.

But what are the RegTech applications?

Some of RegTech's key features are focused on; 

  • Sorting data sets 
  • Analytics for customer data
  • Document analysis with the help of AI
  • Fraud prevention
  • Audit trail
  • Banking supervision
  • Policy management
  • Reporting and training tools
  • Compliance registers
  • Survey applications

But like most new markets, RegTech still has untapped potential and opportunities for venture capital funds, and entrepreneurs. 

The Outlook for RegTech Today

The RegTech market today is very similar to many of the other classic markets that are disrupted by emerging technologies, like insurance or finance. Older institutions and corporates are having to adapt quickly to changing customer needs, and technology is central to this. 

To be more specific, RegTech products are often defined by:

  • Speed. Any development in RegTech is defined by speed and efficiency. Document processing, data analysis and report generation are all done much faster when you can rely on programs to pick up the bulk of the work.
  • Agility. As in other tech-driven markets, agility in development helps RegTech startups solve problems better and faster. This means relatively small and new businesses can compete with long-established corporates, disrupting once stable markets.
  • Analytics And Data Processing. With the help of AI and machine learning, big data sets can be easily analyzed. This provides a lot of insight for regulatory processes, and how they can be improved.
  • Third-party integration. RegTech solutions often focus on integrating third-party apps with each other, or as part of an existing internal system.

But enough with the theory. Now, let’s take a look at some actual RegTech companies, what they do and how their products help drive the market forward.

What Are The Trends Shaping RegTech

Because of the Covid pandemic, as well as continuous tech integration, a few trends are shaping the RegTech market as we speak. 

Some of the most impactful trends are:

  • A default to remote working. While that’s something seen across all industries, RegTech in particular has seen a growth in this sector because remote compliance needs to be effective in industries ranging from health and education to finance and law.
  • Educating the audience. RegTech is an emerging sector, and like most tech-based niches, not all potential customers are educated in its complexities. A big part of RegTech job is to educate its audience and demonstrate the value of its technology.
  • Managing Complexity. New regulations are being passed daily, which is especially true for times of crisis, like the Covid pandemic. Since regulation is evolving, compliance needs to be up to date as well.

Besides these RegTech specific trends, the sector is also subject to the same trends shaping the wider tech ecosystem. Things like AI, machine learning and personalization will play a huge role in RegTech’s trajectory.

For entrepreneurs interested in this niche, the tech market is a good place to start their research. Any new development there can have an impact on RegTech.

To Summarize

RegTech is the application of new technologies to regulated, customer facing industries such as healthcare, finance and education. RegTech products help organisations achieve regulatory compliance faster, maintain compliance, onboard customers better, and get more from their data. 

As a relatively new niche, the space is filled with potential. We hope our article helped you understand the outlook of the market today, as well as what is its possible trajectory for the future.

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