As more innovative technology solutions become available, financial institutions are seeking to adopt Regulation Technology (RegTech) to meet their compliance requirements.
There are number of key trends taking place in the RegTech industry globally. These trends include:-
Increased regulatory demands
Since the economic crisis the huge increase in regulation throughout the financial services industry has lead to a drive for operational efficiency and better cost management. Regulators are demanding more advanced governance and data management, as well as enhanced reporting and operational processes.
Established fund managers and banks are becoming open to partnering with new and growing RegTech startups, in order to address their key operational and compliance challenges.
Areas of financial services which are more easily adopting FinTech and RegTech solutions including payments, operations and governance. RegTech solutions can provide greater confidence in meeting an organisations broad governance requirements for risk and compliance.
Lower RegTech barriers to entry
Most RegTech technology is SaaS/Cloud based meaning startups can offer scalable, cost-efficient, secure compliance solutions. This means that the barrier to entry for RegTech companies is lower now than at any time in the past. Customised software tools can easily track the large multiple of regulatory obligations that face most financial services and asset management companies.
Key target market
One of the key target markets for RegTech firms are large financial services organisations, often based in multiple worldwide locations. This can represent a challenge for emerging companies as they seek to match their growth cycle with their clients international reach.
These global financial organisations are actually well suited to help RegTech companies validate and refine their solutions for the international market.
Most of the world’s global financial regulators are playing catch-up to the emergence of new regulatory technologies. A number of key regulators are making RegTech a central focus of their innovation strategy.
The new FCA regulatory “Sandbox” in the UK will allow eligible firms to test new solutions. These companies do not have to satisfy all regulatory requirements immediately but can test their solutions over a number of months gaining valuable experience and feedback.
Regulators in the UK and Australia have agreed to refer innovative RegTech businesses to each other, as well as sharing information on emerging market trends and their impact on regulation.
The growth in future RegTech opportunities will likely accelerate as dominant market players begin to adopt innovative regulatory and compliance solutions.