We see a whole new sector growing up. The name comes from the marriage of regulation and technology, however foreseeing what it means for financial companies is more comprehensive.

 

In the financial industry the level of regulation is continuously increasing and is not only a great cost factor, but affects the working processes and innovation capabilities of the financial companies, moreover the flexibility and efficiency of their work.

Since data and reporting are in the focus of the regulator as of today, big data analytics and risk management tech companies have a momentum to further develop and offer their regulation-compliant services. These solutions are called regtech solutions and the companies developing solutions, services which support the financial companies to comply with the regulations more efficiently, are called regtech companies. These companies basically interpret the regulatory requirements and build software solutions to effectively comply with them.

Role of these regtech companies are not only to offer the right solutions, but to help the financial companies to clearly understand the regulatory approach and requirements, i.e. how compliance shall be managed, how regulation could be interpreted, how wide playground  the regulation provides to the market players.  It is obvious then, that their knowledge, authenticity is of great importance.  Their interpretation being right can save huge amount of money to the companies not only in investment, but in potential fines, as well. Therefore, regular discussions with the regulator is an absolute must for the regtech companies.

Again, FCA, the UK financial regulator initiated an excellent methodology to cooperate with the industry and the service providers.

The number of regtech companies has been growing in the past years. They use cutting-edge technology in data analytics, AI, machine learning and first of all they automate every and each possible in reporting, in compliance tasks. This way, the regtech solutions reduce operational risks as well.

A regtech company – on the other hand – is not only a software developer company. Building up a regtech company is a very comprehensive, complex challenge. The company shall understand the financial industry, the regulation – in a wider term – , the reasons behind the regulation and also, the society. A RegTech company shall have excellent cooperation and communication skills and regular contact with the regulator so that they can be up-to-date all the time.

RegTech has a very bright future with a lot of opportunity to developers specially good at technology, and able to bring clarity and control to the challenging and very important area of finance.

 

Who are they?

See the research made by Nicolas Heguy: CH&Co – Supporting the development and adoption of RegTech.