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).
Various other factors exist in the financial industry that should drive RegTech startups to continue a trajectory momentum:
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.
It is imperative for businesses to recognize that the bedrock of successful AI/ML integration begins with efficient data organization. No matter how groundbreaking these technologies are, overlooking the basics can impede progress and hinder the potential for innovation.
It is imperative for businesses to recognize that the bedrock of successful AI/ML integration begins with efficient data organization. No matter how groundbreaking these technologies are, overlooking the basics can impede progress and hinder the potential for innovation.
Find out the story behind Opinov8 and get to know a little more about the personalities of the founders in the Opinov8 article!
Find out the story behind Opinov8 and get to know a little more about the personalities of the founders in the Opinov8 article!