The Explosive Rise of Regtech
Regulatory Technology

KCL Fintech Soc​ - Sophie Bieber  London 04.07.19

RegTech stands for ‘regulatory technology’. It is a rising industry within the financial word that assists companies in keeping up to date with the latest regulations.

In a world where laws around emerging technologies are having to be rolled out quickly and constantly evolving, regtech is suddenly under high demand. With so many agile young challenger banks gaining recognition, larger banks need to be able to adapt quickly to new regulations which is especially hard with their larger and often clumsier systems. They need cheap and efficient ways in which to protect against data breaches and money laundering.

Companies can develop their own technology to help them comply with regulations or they can hire outside assistance.

For instance, Sybenetix, a company recently purchased by Nasdaq for an undisclosed sum, is a “behavioural analytics company working with banks and asset managers to improve investment performance and conduct” [1]. They use artificial intelligence to identify the behaviours or traders so they can spot out of character trading to protect against fraud or dangerous trading. This can save banks millions in avoiding false alarms and stock refunds.

In 2016, regtech companies “raised $732 million globally with 102 companies getting funding, marking the highest number of deals” [2].

The current costs of complying with all the new regulations is creating a wide incentive for banks to invest in technologies that can take some of the burden from them.

Stuart Gulliver, released that HSCB spends around $700-$800 every year with around 10% of their workforce in risk and compliance. [3] Thus, startups are popping up everywhere embracing cloud computing and data visualization and blockchain technologies in order to assist big banks regulating their large amounts of data.

​Barry McMackin from Tradeflow explains, “RegTech companes need to show themselves as having expert knowledge of a specific problem and an ability to solve it. On one side, technology will assist firms in complying with regulation, and regulators will require this new technology to make better use of the information provided by the industry.”


[1] https://www.crunchbase.com/organization/sybenetix#section-overview
[2] https://www.cnbc.com/2017/07/25/nasdaq-acquires-sybenetix-a-firm-that-uses-ai-to-sniff-out-rogue-traders.html
[3] http://www.regtechonline.com/?p=186
 


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