RegTech insights, introduction RegTech market


All businesses and organizations have regulations and laws they must abide by to operate. These rules may come from government or their industry, but they all exist to keep industries competitive. However, these regulations are often complex instructions that change from one governing body to the next. Some may seem to contradict each other as well. Regulatory technology, or RegTech, exists to help companies comply with these ever-changing rules.

What is RegTech?

RegTech is the use of technology, with emphasis on information technology, for regulatory monitoring, reporting, and compliance in the financial sector. A subset of financial technology (FinTech), it addresses gaps in the financial services market dealing with regulatory practices and legal obligations. In practice, RegTech offers real-time information, algorithms, and analytics that can enhance a firm’s risk-based operations and processes.

Some key characteristics of RegTech include:

  • Agility – cluttered and intertwined data sets can be decoupled and organized through ETL (Extract, Transfer Load) technologies
  • Speed – reports can be configured and generated quickly
  • Integration – short timeframes to get solutions up and running
  • Analytics – Regulatory technology uses analytic tools to intelligently mine existing “big data” data sets and unlock their true potential e.g. using the same data for multiple purposes.

Some key applications for RegTech include:

  • Legislation/Regulation gap analysis tools
  • Compliance universe tools
  • Health Check tools
  • Management Information tools
  • Transaction reporting tools
  • Regulatory reporting tools
  • Activity monitoring tools
  • Training tools
  • Risk data warehouses
  • Case management tools

Regulatory Challenges Solved by Regulatory Technology

Regulatory compliance is a moving target. There was an average of 200 regulatory changes around the world in 2016 alone. That means you may have over 70,000 changes to process if you do business globally, and that does not count the regulations already in the books. While large institutions can handle the high costs of compliance, smaller entities may not have the economies of scale to remain sustainable. However, businesses cannot ignore compliance either, as the risk of non-compliance is too big. A disaster at one company can ripple through the economy, bringing with it hefty fines and damaged reputations. According to a recent survey by the Aite Group, 27% of companies are not adequately prepared to handle the consequences.

RegTech strives to alleviate some of these global demands placed on companies and regulators. It streamlines information gathering, flow, analysis, and reporting, between all parties involved.

The technology has five focus points:

  • Regulatory Reporting – automated, cloud-based, real-time, regulatory data distribution, reporting, and analytics
  • Risk Management – flag and assess compliance and regulatory risk, risk exposure, and future threats
  • Identity Management and Control – devise and implement counterparty due diligence and Know Your Customer (KYC) procedures. AML and anti-fraud screening and detection
  • Regulatory Compliance – real-time monitoring and tracking of current compliance and upcoming regulations.
  • Transaction Monitoring – real-time transaction monitoring and auditing through Blockchain technology and cryptocurrencies

Through these focal points, firms and regulators hope to free up operational and capital expenses they use for compliance to increase their capacity to innovate. The plan is to leverage existing systems and data to establish regulatorily and reporting in a more cost-effective, flexible, and timely manner without the risks of using newer and untested tools and systems.

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Why Do Organizations Use Regulatory Technology?

However, that does not explain why firms move to RegTech solutions to solve these issues. The concept has been around for a few decades. So, why now? Here are the five most common reasons for current growth and adoption of RegTech and RegTech providers.

1) Increased Regulatory Pressure Lead to More Vulnerabilities

Financial services, healthcare, and other major industries already have a daunting task of staying compliant with existing regulations. With new regulation changes coming over the next five years, these firms are looking for sustainable solutions to remain compliant. Traditionally, organizations did this by hiring more professionals for their respective fields, but the rising costs for these solutions make them unusable in today’s economy. Now, these firms are digitizing and automating their workflows to save costs.

2) Regulators have increased jurisdictional oversight

Regulators have more oversight authority than before. Thus, they are more likely to exercise their oversight, which in turn creates more pressure for firms to comply with their regulations. Some of these regulatory agencies even have their own compliance requirements, making the situation worse. The financial sector has already paid $321 billion in misconduct and mismanagement fines globally. RegTech, such as FiscalNote, simplifies things by creating dashboards to track regulation and requirements.

3) Non-compliance continues to plague the industry

Despite the higher costs of non-compliance, organizations from every sector continue to fall short of meeting their legal requirements. Financial scandals in big-name firms fill news broadcasts regularly, hinting that the industry still lacks sufficient preventative controls and oversight. RegTech, such as Fenergo, centralizes regulatory information to help companies be more proactive in their compliance.

4) High Technical Requirements for Compliance

Manual ad-hoc reporting is no longer enough to meet more regulatory requirements. As systems and operations become more digital, financial organizations need cost-efficient data analytics, quantitative risk modeling, real-time reporting, and more. Because of this, firms turn to agile and scalable cloud-based RegTech to fill the gaps left open by their existing, server-based, legacy systems.

5) Firms want Regulatory Standardization

Financial firms with regulators to standardize their requirements to reduce the complexity of the regulatory landscape. The regulatory agencies have turned to RegTech to do just that. Regulatory technology allows regulators to collaborate with each other to help consolidate requirements and cross-educate.

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The Future of RegTech

While everyone wants regulatory technology to solve these problems, a lot of the necessary tools are not yet available. Fortunately, start-ups everywhere are vying for their spot in the growing industry. Here are three trends that will shape it going forward.

Standardization and Industry Utilities

Most regulatory agencies are looking to establish regulatory seals of approval for different products. They will need scalable, easy-to-use tools to set the standards they use to check for compliance. These tools will most likely come as industry utilities such as a common reporting framework, trade lifecycle monitoring, suspicious activity detection and fraud databases.

Customer-Oriented Systems

Companies are looking for solutions that help them serve the need of their customers. This requires understanding how customers use the technology in association with existing systems. These RegTech solutions may provide fewer process steps, less friction and improved customer service for customers.

Modular, Loosely-Coupled Architecture

RegTech tools will come more modular and loosely-coupled. Companies want and need something tailored to their needs, but they want this on their own terms. Modular architecture allows them to plug and play the services they need when they need them. The design architecture will also allow RegTech solution providers to offer more stable and secure services with well-defined APIs, embeddable or white-labeled screens, zero data lock-in, and monitoring capabilities.

These five developments will assure that RegTech firms have a place in the ecosystem, regardless of how quickly industries adopt their services.

RegTech Employment Opportunities

Financial institutions have a growing need for financial security and for reducing their reputational risks and other repercussions from non-compliance with government and industry regulations. This has led to the pouring of capital into developing and implementing RegTech Solutions for their current workflows and ecosystems. This has only increased as regulators and service providers embrace the latest regulatory tools and technologies available to them. Now, what was once seen as mostly-unnecessary luxuries has become a vital component of many compliance departments.

RegTech turned what once was a daunting manual task for compliance officers, into a highly efficient and cost-effective automated solution. Solutions providers are popping up all over the world to stake their claim in this brand-new industry, with London leading the charge. Each one provides a means for financial firms to keep up with the ever-changing regulatory landscape.

Here is a small list of regulatory technology service providers currently operating in Europe.

United Kingdom RegTech Providers

  • Silverfinch Asset Management uses a secure and control environment to administer and ensure fund data
  • Check Recipient finds and prevents misaddressed emails from being accidentally released
  • Passfort security keychain creates, stores, and manages unique and secure passwords for digital services and apps
  • Percentile offers global risk management builds technology
  • Algo Dynamix finds and manages disruptive events in global financial markets and anticipates price movements hours or days in advance
  • Fund Apps cloud-based compliance management system collects regulatory information for asset managers, hedge funds, and institutional investors
  • Suade technology solutions help banks achieve continuous compliance, manage their costs, and easily conduct analyses

Ireland RegTech Providers

  • Corlytics offers financial compliance risk analysis
  • Trustev online fraud prevention solutions scan for real and fake transactions in real time
  • TradeFlow tracks trade data and risks
  • Vizor enables the supervision of remote offices and locations for large companies
  • AQMetrics integrates regulatory risk management with compliance
  • Sysnet Global Solutions offers international information security and compliance validation

Switzerland RegTech Provider

KYC Exchange offers a secure and standardized “Know Your Customer” (KYC) communication platform for customer due diligence (CDD)

Netherlands RegTech Provider

OSIS analyzes credit risk for banks and investors through coherent statistical analysis of data and forward-looking risk distribution

These are just a small sample of the companies working in the RegTech sector. The field shows no signs of stopping anytime soon, and that makes it a good career choice for those with the right skills. Even if you cannot find suitable employment, there is enough room in the industry that you can start your own RegTech company to provide a unique regulatory compliance solution to the world.

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RegTech Career Profiles

Speaking of having the right skills, most universities do not have a dedicated RegTech program. Most students must take a FinTech program and make regulatory technology their concentration. This might be because the sector is still too young to sperate itself from FinTech, but all is not lost. Most universities do offer Regulatory Technology courses for students wanting to take that route. Many even offer these courses as digital online programs with open enrolment.

Regardless of the institution, the FinTech-RegTech program fills the talent gap needed to solve the regulatory challenges not addressed with traditional banking careers. These courses focus on financial technology and innovation to enable students to identify disruption opportunities in the financial industry. They can then use their skills to launch new RegTech ventures or to improve existing financial service firms with new technologies and compliance techniques.

After completing these programs, you should have the following skills needed to solve the regulatory problems plaguing the financial sector:

  • Draft, strategize and develop disruptive RegTech innovations, tools, and techniques
  • Predict the effect new regulations have on future commerce products
  • An understanding of the future of money, markets, transactions, and FinTech, RegTech, and PropTech

Types of Regulatory Technology Employment

With these skills, you can start your career in RegTech. As mentioned before, you have a lot of opportunities in the sector. Any company that deals with finances and money in some way needs regulatory technology specialists to remain compliant with their local laws and industry regulations.

The following is a list of common job positions. Most of them are in sales, but a few are in product development too. You can even find a few RegTech consultant opportunities if you prefer to follow that route.

Beyond these specific positions, you can go into FinTech if you do not find anything in RegTech that is right for you. Most regulatory technology jobs overlap with FinTech. So, you may find a way to focus your RegTech skills to the greater technology needs of the financial industry.

  • Business Development Manager, RegTech Platform
  • Product Manager, Trade Finance Compliance
  • Senior Sales, Enterprise Software
  • Sales Manager, Risk & Compliance Software
  • Business Development Manager, Consulting Services
  • Sales Manager, Corporate Treasury Software
  • Product Manager, Banking & Corporate Payments
  • Senior Relationship Manager, Consulting Services
  • Senior Sales, GRC Solutions
  • Senior Sales, Investment Software
  • Sales, Risk Management
  • Product Specialist, Banking Regulatory Technology
  • Business Analyst, Regulatory Technology
  • Program Manager, RegTech
  • Technology Consultant, Regulatory Technology
  • RegTech Software Engineer
  • Consultant Regulatory Compliance
  • Consultant, IT Risk

How Can You Help?

RegTech solves the issue created by the need for strict regulations. Those regulations exist because someone in the past abused customers or the industry enough to force governments and industry watchdogs to establish them. While they are thus needed, they can be vague in both wording and practice. Thus, they can lead companies to breaking rules without knowing.

You can help unravel this situation by working with your local regulator to enact clear and concise regulations that are easy to understand and use. Then, we can create the RegTech tools that regulators and firms can use to enforce them.

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