Money is volatile, and so is the financial market. By which we mean that it can change at any point in time.

As per Sir John Templeton, the famed value investor, “The four most dangerous words in investing are: “This time it’s different.”

Probably this is the primary reason why financial services fall under one of the most regulated industries in the world.

As the financial industry is built with complexity and volatility, regulations play catalysts and impact velocity and types of changes. Nevertheless, technology once again plays an active role in getting off the load of the risk and compliance officers, who were doing all of it manually in excel sheets and legacy systems, in the most traditional manner.

Coming to regtech, a lot of people believe that it is perhaps just a subset of fintech. But how true is that?

Let’s find out.

Regtech is the concept that brings together three essential elements, namely, people, data, and regulations, intending to enable firms to achieve a culture of compliance.

On a broader note, it is a technology that powers the combination of these elements to empower and enlighten enterprises and their regulations.

The idea behind this tech-driven concept is to manage regulatory processes within the financial industry through technology. And the main functions covered are regulatory monitoring, reporting, and compliance.

For better clarity, here is the definition from Investopedia,

“Regtech is the management of regulatory processes within the financial industry through technology. The main functions of regtech include regulatory monitoring, reporting, and compliance.Regtech, or RegTech, consists of a group of companies that use cloud computing technology through software-as-a-service (SaaS) to help businesses comply with regulations efficiently and less expensively. Regtech is also known as regulatory technology.”

Understanding regtech in detail

RegTech is a clan of tech companies that work toward resolving challenges that arise from a tech-driven economy through automation. Progress in technology and surge in digital products has increased data breaches, cyber hacks, money laundering, and other fraudulent activities. However, to deal with such inadequacies effectively, regtech solutions are a must.

Innovation and progress in technology have given birth to Regtech. It is a fundamental that allows risk and compliance officers to overcome the stereotype of the collaboration of data sets manually to be able to use them for different functions of the company.

Booming technologies such as cloud, big data, and machine learning when harnessed under the concept of regtech alleviate the risk factor associated with a company’s compliance department as it potentially provides data related to money laundering activities conducted online. These are activities that a traditional compliance team might fail to identify due to an increase in underground marketplaces online.

The equation

Regtech tools are designed to monitor transactions that occur online in real-time and potentially identify issues or irregularities that take place in the digital payment sphere. Any oddity spotted is immediately conveyed to the financial entity to analyze and determine if any kind of fraudulent activity is taking place.

Companies that successfully identify potential threats to financial security at the right time are the ones that can reduce risks and costs associated with shortcomings, such as data breaches and lost funds.

To make this happen with the right expertise, skills, and tools, regtech companies work in collaboration with financial institutions and regulatory bodies by leveraging the power of cloud computing and big data to share information.

Pro tip: If you are looking for a low cost yet promising technology to share data quickly and securely with other enterprises, cloud computing technology can be the right choice.

Regtech vs. fintech

Most people believe there is not much difference between fintech and regtech. It is considered that both these terms are peppered generously in the world of finance. Additionally, both these concepts are considered to be applied exclusively in the banking and financial sector. Well, this isn’t 100% true, as regtech applications are used in a much broader aspect.

Spot the difference

As a lot of people consider fintech and regtech to be almost the same, it is time to decode these concepts for better clarity.

Fintech and regtech undeniably are changing the face of financial institutions and banks. Still, it is important to understand that regtech has a much wider application and covers a more extensive set of industry verticals.

Remember, money is involved in every business, and so are complex regulatory requirements. Therefore, regtech is not just limited to banking and financial services.

There are several definitions and explanations available on these concepts. But to demystify confusion, here is an excellent piece of information acquired from a paper published by Thomson Reuters that makes complete sense.

“FinTech is looking at innovative solutions typically for consumers in the little gaps left by financial services organizations, the bigger banks, the bigger insurance businesses … RegTech is looking at really a very different area, some of the technologies are similar, but the solution is different. Here we’re looking at how institutions, banks, insurance companies, regulated entities can comply with regulation and do that in a better and more efficient way.”

Growing need for regtech  

Over the past few years, the financial sector has witnessed a plethora of changes and advancements. As a part of this change, several financial institutions have teamed up with fintechs to deal with various aspects of the business. Compared to focus on customer-facing elements, financial companies are now giving equal attention to backend aspects, too, owing to increasing pressure from regulators on data compliance and governance.

Believe it or not, the financial services sector has been experiencing a transformation that includes transition on the technology front. Today, more and more financial companies are transitioning toward an open API-based technology architecture that is favorable for integrating regtech.

Dealing with an increase in regulatory activity and compliance costs, stakeholders such as investors and venture capital firms are relying on regulatory technology popularly known as RegTech. Experts state that the growing popularity of regtech is a result of the increasing number of financial services that are looking forward to taking advantage of technological innovation.

Overview of technologies supporting regtech

  • Big data
  • Blockchain
  • Machine learning
  • Artificial Intelligence (AI)
  • Cloud computing
  • Virtualization
  • API
  • Data mining and analytics


As mentioned in the beginning, the money market is volatile, and hence building on robust and effective solutions related to Regtech is inevitable. Considering the complexity of the financial industry and the fact that they operate on strict and complex legal, regulatory requirements, regtech solutions are essential to help the financial institutions comply with the regulatory requirements more effectively and in a cost-effective manner.

Not just this but leveraging the power of regtech solutions can help businesses –

  • Identify frauds
  • Adapt to new regulations faster
  • Enhance data collection and data analytics
  • Simplify data management

To know more about Financial Security, you can download our latest whitepapers on Security.