How RegTech startups are already saving companies money

Research & development consulting

RegTech (regulatory technology) is still a new field within the financial services industry, but some already have said it’s the new FinTech. It utilizes information technology “to provide nimble, configurable, easy to integrate, reliable, secure and cost effective regulatory solutions,” according to Deloitte.

U.S. SEC Commissioner Michael Piwowar adds that RegTech “also refers to the use of technology by regulated entities to streamline their compliance efforts and reduce legal and regulatory costs,” such as using blockchain and AI tools to “allow the easy and secure transfer of critical regulatory data to multiple federal agencies.”

Growth in the number of RegTech firms shows that the past seven years have been robust in this new arena. The industry has seen a 23 percent increase in the number of RegTech firms in regulatory compliance and risk management alone. Other areas where segments showed a jump in growth of these firms include financial crime (13 percent), identity management (7 percent) and compliance support (6 percent).


RegTech growth factors

Various other factors exist in the financial industry that should drive RegTech startups to continue a trajectory momentum:

  • Regulatory compliance remains significant among global financial institutions
  • 2018 saw EU regulations MiFID II and PSD2 come into effect
  • RegTech startups provide compliance burden solutions
  • The evolving landscape of business models and consultancies
  • New partnerships and improved impressions of RegTech
  • Support by regulators for RegTech
  • Financial institutions will acquire RegTech solutions by 2020
  • Startups surely will improve strategies to collaborate with one another and financial institutions.
  • Already, advocates, global regulators will soon adopt RegTech


How 3 RegTech startups are starting to make the difference

1. Nasdaq acquired Sybenetix, which makes a behavioral analytics app that tracks people in financial institutions. It monitors unusual or suspicious behavior that could be a sign of misconduct. Banks, hedge funds and regulators can also use this technology.

2. AlgoDynamix is a “risk analytics company focusing on financially disruptive events” using algorithms to predict price movements in advance. “Its customers include investment banks and asset managers such as hedge funds, CTAs and family offices. The deep data algorithms underpinning the AlgoDynamix analytics engine use primary data sources (the world’s global financial exchanges) and proprietary unsupervised machine learning technology. The analytics engine detects market anomalies and anticipates directional price movements hours or days in advance of the event. Unlike competitive solutions, Alodynamix’s real-time analysis does not rely on historical data or previous disruptive events.”

3. Suade helps banks run analyses of their own practices, but also then adjust them in compliance with changing regulatory requirements, with a focus on flexibility. With the UK leaving the EU in 2019, concern is high about the future of financial regulation as a result, which could involve multiple regulatory swings. Startups like Suade provide technology that is adaptable in a quickly changing environment. “RegTech is all about minimizing uncertainty,” Suade co-founder Diana Paredes says.

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