Introduction to RegTech

Are you wondering what RegTech is? Struggling to understand who it’s for or what it entails? Then you’ve come to the right place. The RegTech concept is revolutionising compliance and for a very good reason. RegTech enables companies to grow while complying with even the most complex regulations. And that’s exactly why you should know all about it now.

As the RegTech concept is based on keeping up to date with all the latest developments, we decided to give you a comprehensive overview of the RegTech landscape. We cover a variety of aspects, from basic definitions and background to industry associations, to our favourite reading.

So sit back, buckle up and enjoy your introduction to RegTech. It’s time to share our insights.

11 Main RegTech Causes

What are the causes of RegTech? In the broader literature, there are two widely held perspectives on the RegTech revolution. In the first version, RegTech is exclusively the consequence of the 2008 financial crisis and the regulatory tsunami it triggered. In the second version, RegTech is only an add-on to FinTech and the related demand for the digital processing of regulations.

At Apiax, we do not believe that any one of these explanations alone can convincingly capture the phenomenon. Instead, we find that the RegTech revolution is the result of a number of broad and powerful forces. Therefore, we present to you 11 causes on why RegTech is important.

1. 2008 financial crisis

The regulatory environment has been constantly expanding since the financial crisis of 2008. The never-ending stream of new regulations coming from the public, government and regulators led to an explosion in the scope and complexity of the regulatory environment. RegTech helps to meet these challenges efficiently.

2. Technology

Technological developments are another important cause of the RegTech revolution. Obvious, but still relevant and true: technological developments enable new ways of dealing with regulatory challenges and thus bring new and exciting business ideas to the minds of entrepreneurs.

3. FinTech

As Forbes writes in this article, the FinTech revolution has spawned numerous innovations that have led to a strong demand for regulatory technology solutions. Many FinTech innovations require the integration of digital regulations into their solutions in order for them to work efficiently.

4. New standards

PSD2, Open Banking, an emerging API economy and cloud computing—just to name a few—are new technologies that financial services providers are trying to keep up with. Sometimes RegTech solutions are a response to these developments, and sometimes they make them possible.

5. Digital habits

Customers demand services and products that match their increasing digital habits. Products and services must be accessible on mobile devices and communication must take place on digital channels. RegTech solutions help to make these offerings compliant.

6. Competition

The intelligent implementation of new technologies by new market participants is a challenge for the entire spectrum of financial services offered today and in the future. Some of these new entrants are established technology companies in other fields. They understand the potential of regulatory technology and are pushing into this area with vigour.

7. Cost pressure

With increasing cost sensitivity, RegTech helps to increase productivity and efficiency. It also offers improved traceability and auditability as a welcomed side effect.

8. RegTech for regulators

We believe that regulators will soon distribute regulations digitally. Financial service providers will transform these regulations seamlessly into digital rules. In this new reality, regulatory experts will require an entirely new and digital workplace. Read more in our blog post.

9. RegTech against cybersecurity

Financial services companies need to follow very concise regulations and restrictions, including when it comes to cybersecurity. Regulatory technology can help companies by supplying continuous monitoring of security compliance. Read more in our blog post.

10. New compliance risks

The 2020 pandemic and its impact on workplace mobility has led many companies to adopt cloud-based interaction systems. Softwares like Zoom, Microsoft Teams and Skype are the new normal. However, this inadvertently leads to new compliance risks and potential breaches.

11. Unachieved growth goals

RegTech is not only born out of the need to reduce risks and costs when it comes to regulatory compliance. It also enables companies to achieve growth targets that would otherwise be out of their reach.

Read the full RegTech Guide 2021 Edition here. Find out more about Apiax here.