RegTech is a buzz word that, over the last couple of years, has found its place as a mainstay in the financial services industry.  What exactly is RegTech, and how does is differ from FinTech?  The answer is simple.  RegTech is short for regulatory technology and is a subset of FinTech that has risen out of the global complexity of regulation and its impact on financial services. 

RegTech firms are emerging in an effort to move the industry away from ‘big data’ towards ‘smart data’ by utilizing robotic process automation and machine learning, along with regulatory repositories.  These firms are tapping the data captured to meet regulatory requirements and using it in a way that is more meaningful to the banks, investment banks, and mortgage companies that are producing the data to regulate risk. 

How will RegTech modernize compliance going forward?

The FinTech label, which is more widely known, is often applied to RegTech initiatives that are clearly addressing regulatory requirements and corresponding data in ways that impact the financial services industry.  Using RegTech to manage compliance needs will be the clear pathway to gaining competitive strength in the near term, diminishing growing resource constraints and costs resulting from engorged compliance requirements. 

 RegTech will create organizations that are ready to handle the future of FinTech, navigate regulatory change, and surmount the complexities surrounding the regulatory landscape.  Leveraging innovative technologies will naturally bring down costs and exposure to process failures.

What infrastructure is needed to begin adopting RegTech? 

Organizations need operational workflow.  There are solutions available, such as CLARIFIRE, which plug into regulatory rules engines and transform the output into compliant workflow.  Interactive processes and a business rule engine drives control, governance, and risk mitigation. The infrastructure required for SaaS solutions like this is minimal.  All clients need is access to the internet.

Is RegTech for every financial institution?

Large or small, every organization can benefit from RegTech.  A full enterprise license for a large RegTech repository may not be necessary for every organization, but a hybrid approach with a workflow automation solution focusing on operational efficiencies while driving compliance is an affordable option for smaller organizations.

What successes are organizations experiencing with RegTech?

Clarifire clients have seen elimination of fines, reduced cycle times, and increased visibility across their organizations.  The successes come from a blending of tapping into regulatory solutions and transforming workflows based on outputs. This provides the quality control governance and human interaction needed at the exception management levels.

What challenges are organizations facing using RegTech?

In the industry, we’re seeing where some purely RegTech solutions may bring great products.  They have the rules, logic and output, but nothing for organizations to execute changes with.  This brings me back to an earlier point that organizations need operational workflow.  They can incorporate RegTech into that functionality.   If an organization already has a RegTech solution, we recommend taking the trends and exceptions and build processes that eliminate those that have a negative impact on the business.

How will RegTech emerge, mature, and change moving forward?

We strongly feel that the trend will remain moving toward a focus on creating operational efficiencies through technology transformation and within that transformation will be RegTech, but RegTech will not be the only focus.  RegTech and FinTech companies will need to keep an eye on the financial services big picture, with the customer front and center. The trend will be a FinTech/RegTech hybrid with a focus on the consumer at the forefront. 

More companies will be looking for an end to end solution instead of having to manage disparate systems.  The result will be more strategic partnerships, mergers, and acquisitions amongst technology providers. 

As financial services providers innovate, regulators are doing the same. In 3 to 5 years we expect to see the industry as a whole (financial institutions, technology providers and regulators) working together and not against each other to achieve compliance and efficiencies. 

What’s next?

According to Computer Weekly, “2016 may have been the year when you heard about RegTech, but 2017 is going to be the year when you’ll understand that your business can’t run successfully without it.”  As technology becomes more accessible, sophisticated, and affordable, more financial services firms are likely to adopt RegTech coupled with workflow automation solutions.  Will your organization be the next?

Jane Mason, Founder and CEO

Jane has applied her vast experience (over 25 years) operating process-driven businesses to successfully redefine client-focused service. Jane has worked with expert programmers to apply cutting-edge web-based technology to automate complex processes in industries such as Financial Services, Healthcare and enterprise workflow. Her vision confirms Clarifire's trajectory as a successful, scaling, Software-as-a-Service (SaaS) provider. A University of South Florida graduate, Jane has received many awards related to her entrepreneurial skills.