FinTech is broadly defined as technological innovations that support or enable banking and other financial services, potentially disrupting the financial services sector and/or making it more efficient. RegTech is a subgroup of FinTech, described as technology that is providing solutions to companies across all sectors of financial activity to ensure that they are able to comply with regulatory requirements.

Increased regulatory burden has created high demand for new technological solutions to regulatory challenges. Whilst regulations are becoming increasingly prescriptive as to the result to be achieved (e.g., what details of trades must be reported), they generally are not prescriptive as to how to achieve the required result, so the methods of compliance can be varied. RegTech innovations have the potential to increase margins for companies subject to a myriad of multi-jurisdictional requirements and to allow for competition by creating a path for a less expensive entry for startups into heavily regulated industries. In this article, we discuss the potential regulatory burdens placed on financial institutions and startups, and the related costs, potential solutions being offered, recent investments in RegTech, and what we see for RegTech in an uncertain future.

Visit capco.com for the full article.