Fintech Infographic of the Week: The World of Regtechby Fintechnews Switzerland July 4, 2019
Regulatory technology, or regtech, is an emerging field within the fintech industry that utilizes information technology to enhance and streamline regulatory processes. The main functions of regtech are regulatory monitoring, reporting and compliance, with companies in the space using technologies like artificial intelligence (AI) and cloud computing to enhance transparency and consistency, as well as standardize regulatory processes.
Ever-increasing regulatory burden, rising compliance costs, along with regulators’ and the industry’s growing interest in automation, have created an environment ripe for disruption by emerging regtechs. Today, regtech is one of the fastest growing segments of fintech, and by 2020, KPMG estimates that regtech will make up 34% of all regulatory spending. By 2022, the firm forecasts regtech spending to reach US$76 billion, up from US$10.6 billion in 2017.
For our weekly Fintech Infographic of the Week series, we look today at the emerging regtech industry with a visual from Raconteur.
According to the infographic, titled World of Regtech, regtech companies can be classified into seven categories:
- Account verification, which accounts for 26% of the world’s regtech companies, and focuses on enhancing the process of gathering and verifying information, know-your-customer (KYC) guidelines and anti-money laundering (AML) policies. An example is Onfido, which provide KYC background checking for financial institutions available on any device.
- General compliance (16%), which includes companies that provide enterprise-grade solutions and other process optimization tools. An example is Finform, which digitizes and approves compliance formalities, via standardization, industrialization and digitalization of relevant processes and a combination of software and services.
- Data capture and integration (14%) for enhanced analytics. An example is OpenGamma, a cloud-based, open platform for analytics and trade risk management for derivatives trading.
- Monitoring transactions (13%) for fraud and suspicious activities. An example is RedOwl Analytics, which provides a behavioral analytics platform that allows information security and regulatory surveillance teams to mitigate the threat of malicious insiders.
- Risk analysis and management (13%). An example is Ayasdi, a big data and analytics company that helps financial institutions with their risk management and modeling.
- Regulatory analysis and training (10%), which focuses on tracking, identifying and interpreting regulations; and
- Reporting (9%), including consolidating and computing data to generate reports. An example is Ripcord, which uses robotic digitization software to automate and replace the current paper processing and regulatory reporting.
The top technologies used by regtech solutions are data analytics and AI, followed by robotic process automation and distributed ledger technology.
Among the key benefits of regtech, financial services companies, regulators and trade associations cited automated and streamlined processes, reduced risk, increased transparency, reduced costs, and enhanced resilience to cyberthreats.
Global financial services firms typically deploy both regtech solutions developed in-house and externally. 26% however said all their regtech solutions were developed by third-parties, and 22% said they exclusively use regtech solutions that are developed in-house.
As the global regtech market continues to witness strong growth, with revenues expected to be worth US$12.3 billion by 2023, another segment called supervisory technology (suptech) has also been rapidly emerging. Suptech refers to technology solutions used by regulators and public authorities to to automate and optimize supervisory tasks, and many developments have taken place in the field in the past year.
The Bank of Italy has been engaged in an internal pilot project aimed at deriving textual sentiment from Twitter posts and generating a score for depositors’ trust in banks at any point of time.
US company Digital Reasoning worked with the Bank of England on an AI-based suptech project focused on helping the bank’s supervisory team automate information extraction from regulatory documents using natural language processing (NLP) techniques.
World of Regtech infographic by Raconteur:
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