Financial Technology and Regulatory Technology are so closely associated that the two are practically " built in" to each other, but they are not the same. The intersection between FinTech and RegTech necessitates parallel development, which can make blur the line between the two.
FinTech improves and automates financial functionality, while RegTech handles compliance insurance, risk assessment and activity monitoring. RegTech is concerned with all FinTech, but FinTech is not concerned with all RegTech. Understanding how the two are related is important to understand how they are different.
A confusing history
The reason that some people confuse the two stems from the fact that RegTech exists because of FinTech. RegTech actually began as a subgroup of FinTech, but it has grown into something that extends beyond that original scope. FinTech is exclusive to the banking and financial industries, but RegTech is not. However, RegTech exists because it is necessary for holding FinTech accountable. New technology that collects massive amounts of information has created a wide range of new applications for RegTech.
Because RegTech needs to keep up with changes in FinTech to do its job, it makes sense to develop both at the same time. And because RegTech started as an offshoot of FinTech, it makes practical sense for FinTech to incorporate RegTech in the development process. Additionally, both technologies have a vested interest in protecting information.
At the core, the reason the two are not the same is RegTech can be applied to more than just the financial industry. This might seem unusual because RegTech started because of FinTech but grew into something more. The overlap stems from both regulators and businesses using RegTech to ensure compliance. While RegTech needs to keep up with FinTech changes, it also needs to keep up with other information technology changes to maintain successful regulation.
RegTech extends beyond FinTech
Though this was not the original intent, RegTech applications extend to other types of data management, including personal information. RegTech's move beyond the financial industry makes sense because governments are regulating how businesses store personal information — like financial information — in regards to privacy, security and use. RegTech is important for security firms and any business concerned with regulatory compliance. Additionally, businesses can use RegTech concepts to interpret and analyze the information they collect to make projections akin to what the financial industry does.
Businesses that work in the financial industry can benefit from the help of experts in both FinTech and RegTech to improve operations and make sure they're keeping up with the law. Businesses outside of the financial industry have much to learn about how to utilize RegTech by looking at its relationship with FinTech.
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