Regulatory technology

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Regulatory technology, in short regtech, is a new technology that utilizes information technology to enhance regulatory processes. With its main application in the Financial sector, it is expanding into any regulated business with a particular appeal for the Consumer Goods Industry. [1] It puts a particular emphasis on regulatory monitoring, reporting and compliance and is thus benefiting the finance industry. The objective of RegTech is to enhance transparency as well as consistency and to standardize regulatory processes, to deliver sound interpretations of ambiguous regulations and thus to provide higher levels of quality at lower cost.[2] Oftentimes RegTech companies utilize the cloud through software-as-a-service.

RegTech to date has been focused on the digitization of manual reporting and compliance processes, for example in the context of Know your customer requirements. This offers significant cost savings to the financial services industry and regulators. However, a 2016 academic paper suggested that the potential of RegTech is far greater stating that "it has the potential to enable a close to real-time and proportionate regulatory regime that identifies and addresses risk while also facilitating far more efficient regulatory compliance".[3] Effective regulatory technology deals with risk quickly and in strict compliance with national and international regulations such as: The Patriot Act, The Bank Secrecy Act, FATF recommendations and EU Anti-Money Laundering Directives.[4]

The report goes on to suggest that RegTech's transformative potential will only be fully captured by a new and different regulatory framework situated at the nexus of data and digital identity. The developments in FinTech, the tremendous changes in emerging markets, and the recent pro-active stance of regulators (for instance with the development of regulatory sandboxes), may potentially combine to facilitate a transition from one regulatory model to another.[3]


At a governmental level, the FCA was the first governmental body to establish and promote the term RegTech, defining this as: "RegTech is a sub-set of FinTech that focuses on technologies that may facilitate the delivery of regulatory requirements more efficiently and effectively than existing capabilities".[5]

In March 2015, a report by the UK Government Chief Scientific Adviser, stated that "FinTech has the potential to be applied to regulation and compliance to make financial regulation and reporting more transparent, efficient and effective – creating new mechanisms for regulatory technology, RegTech".[6]

Yet the vision of a technology led regime has already been proposed as early as 2014, by Andy Haldane, during a keynote address at Birmingham University

I have a dream. It is futuristic, but realistic. It involves a Star Trek chair and a bank of monitors. It would involve tracking the global flow of funds in close to real time (from a Star Trek chair using a bank of monitors), in much the same way as happens with global weather systems and global internet traffic. Its centerpiece would be a global map of financial flows, charting spill-overs and correlations.[7]

On the private sector side, two pressure points have facilitated the development of RegTech. On the expense side, post-crisis fines have exceeded US$200 billion,[8] and the ongoing cost of regulation and compliance has become a primary concern industry-wide.[9] On the revenue side, competition from FinTech companies is expected to put US$4.7 trillion of revenues at risk.[10] These expense and revenue factors are driving the development of RegTech. As with FinTech,[11] the 2008 GFC represented a turning point in the development of RegTech. However, the factors underlying, and the beneficiaries of, RegTech are quite different. FinTech growth has been led by start-ups (now increasingly partnering with, or being acquired by, banks and other traditional financial institutions),[12][13] whilst RegTech developments to date are primarily a response to the huge costs of complying with new institutional demands by regulators and policy-makers.[14]

For the financial services industry, the cost of regulatory obligations has dramatically increased, such that 87% of banking CEOs in one survey consider these costs as a source of disruption. This provides a strong economic incentive for more efficient reporting and compliance systems to better control risks and reduce compliance costs. Furthermore, the massive increases in the volume and types of data that have to be reported to regulatory authorities represent a major opportunity for the automation of compliance and monitoring processes. For the financial services industry, the application of technology to regulation and compliance has the scope to massively increase efficiency and achieve better outcomes.

Recent developments[edit]

BBVA, which hosted a RegTech innovation lab, quoted recently, "Regtech solutions also allow banks to boost their responsiveness to regulatory changes, because they are, in theory, designed to adapt dynamically to new requirements in an almost immediate manner".[15] Earlier, in March 2016, BBVA made the following statement in its paper titled "Banking Outlook":

"The term RegTech refers to a set of companies and solutions that marry innovative technology and regulation to address regulatory requirements across industries, including financial services. RegTech companies focus on the automation of manual processes and the links between steps in analytical/reporting processes, the improvement of data quality, the creation of a holistic view of data, the automated analysis of data with applications that are able to learn during the process, and the generation of meaningful reports that can be sent to regulators and used internally to improve key business decision making."[16]

In November 2017, FinTech Global conducted a comprehensive review of the RegTech landscape globally, and selected the world most innovative 100 RegTech companies as RegTech 100 that every financial institutions should know about in 2018.[17]

In January 2018, the Monetary Authority of Singapore published a circular to licensed financial institutions that required such financial institutions to obtain a report from an auditor or independent qualified consultant that assessed any new technology solutions used in the course of know your customer procedures.[18] This requirement has been expanded to cover potential licensees under the Payment Services Act.[19]

Key characteristics[edit]

Here are some of the key characteristics[20] of RegTech:

  1. Agility – cluttered and intertwined data sets can be decoupled and organised through ETL (Extract, Transfer Load) technologies
  2. Speed – reports can be configured and generated quickly
  3. Integration – short timeframes to get solution up and running
  4. Analytics – RegTech uses analytic tools to intelligently mine existing “big data” data sets and unlock their true potential e.g. using the same data for multiple purposes.


RegTech can have applications such as:

  • Legislation/Regulation gap analysis tools
  • Regulatory Monitoring
  • Policy Management
  • Compliance universe tools
  • Health Check tools
  • Identity verification
  • Management Information tools
  • Transaction reporting tools
  • Regulatory reporting tools
  • Activity monitoring tools
  • Training tools
  • Risk data warehouses
  • Case management tools
  • Horizon scanning
  • Transaction monitoring
  • Product Requirements Governance
  • Product Legal Information Management (labelling, Safety)

Startup developments[edit]

As soon as RegTech sub-set first appeared, a number of companies have been spawning in order to tackle various regulatory problems. Deloitte published a report on RegTech Universe[21] in 2017 listing more than 150 RegTech startups globally. In January 2017, Citi has also published a report under Global Perspectives & Solutions[22] where it identified 24 KYC FinTech startups in the RegTech space globally.

In 2017, FinTech Global released a list of the top 100 RegTech companies in the world.[23]


  1. ^ Schueffel, Patrick (2017). The Concise Fintech Compendium. Fribourg, Switzerland: School of Management Fribourg.
  2. ^ "Is Regtech "The next big thing"? – First part - Banking blog". Retrieved 2017-11-09.
  3. ^ a b "FinTech, RegTech and the Reconceptualization of Financial Regulation". Northwestern Journal of International Law & Business, Forthcoming.
  4. ^ "AML Compliance Solutions". Retrieved 2019-08-15.
  5. ^ FCA (2016-02-23). "RegTech". Financial Conduct Authority. Retrieved 2016-06-05.
  6. ^ "FinTech: Blackett review - Publications - GOV.UK". Retrieved 2016-07-09.
  7. ^ Andy Haldane, Chief Economist, Bank of England, Speech at the Maxwell Fry Annual Global Finance Lecture: Managing Global Finance as a System, Birmingham University 10 (Oct. 29, 2014).
  8. ^ Cox, Jeff (30 October 2015). "Misbehaving banks have now paid $200B+ in fines".
  9. ^ "Thomson Reuters Annual Cost of Compliance Survey Shows Regulatory Fatigue, Resource Challenges and Personal Liability to Increase Throughout 2015". 13 May 2015.
  10. ^ "The fintech revolution".
  11. ^ "The Evolution of Fintech: A New Post-Crisis Paradigm?". D.Arner, J.Barberis & R.Buckley.
  12. ^ Finextra (16 September 2016). "Banks rushing to collaborate with fintech startups".
  13. ^ EY, Fintech: Are Banks Responding Appropriately? (2015); Andrew Meola, 1 in 5 European Banks Would Buy FinTech Startups, Business Insider (July 17, 2016),
  14. ^ [7] See Gregory Roberts, FinTech Spawns RegTech to Automate Compliance, Bloomberg (June 28, 2016)
  15. ^ BBVA (2016-05-23). "10 keys to understand what regtech is all about - BBVA NEWS". NEWS BBVA. Retrieved 2016-06-05.
  16. ^ "Banking Outlook" (PDF). BBVA. BBVA FINANCIAL SYSTEMS UNIT. March 2016.
  17. ^ "RegTech 100 – The world's most innovative RegTech companies that every financial institution needs to know about". Retrieved 2017-11-08.
  18. ^ Chris Holland, Felicia Marie and Maya Deering. "Non-Face-to-Face-KYC Explained". Holland & Marie. Retrieved 10 August 2019.
  19. ^ Chris Holland, Felicia Marie and Maya Deering. "Non-Face-to-Face-KYC Explained". Holland & Marie. Retrieved 10 August 2019.
  20. ^ "Is RegTech the new FinTech? | Deloitte Ireland | Finance, Technology". Deloitte Ireland. Retrieved 2016-06-05.
  21. ^ "RegTech Universe". Deloitte Luxembourg.
  22. ^
  23. ^

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