The RegTech concept is increasingly present in business reality today. It is a term that was born after the financial crisis of 2008, when regulators understood the need to develop new rules that are more effective and that anticipate the imminent transformation and digitization of various industries.
The evolution of a greater and more extensive regulatory control and the progression of technological solutions applied to business processes, companies and institutions resulted in the birth of the RegTech industry.
RegTech concept meaning
RegTech, formed by the words Regulation and Technology, refers to the convergence between legal regulations and technological solutions. In this way, technological solutions are born with the objective (main or collateral) of adapting and transforming certain processes of an organization in such a way that they fully comply with the regulatory requirements of each sector.
Thus, a RegTech solution can arise both from a need for digital transformation that will require adjusting to existing regulation and from the need to adapt to a regulation using a technological solution. Relying on RegTech is, therefore, a double benefit with the following advantages:
- Simplification, optimization and automation of the regulatory and bureaucratic control processes of companies and organizations.
- Taking advantage of the latest technological solutions to comply with the relevant regulations, reducing costs and time.
- Improve the efficiency and productivity of legal and compliance departments.
- The peace of mind of complying with regulations even in innovative and cutting-edge processes.
- Elimination of risk and fraud, especially in processes such as customer acquisition or payment methods.
- Improvement in customer relationships and the company’s reputation.
On many occasions, we can see how RegTech is related to FinTech. This is due to the fact that financial and banking industries have been the first areas that have made the use of technology to comply with regulations that affect them.
Regulation and technology
At one point, we were able to see how regulators lagged behind technology. However, for a few years now, in certain sectors and in frameworks such as the European Union, this has been the other way around. Digital transformation and constant innovation is a reality that legislators are already familiar with.
That is why companies, organizations and institutions can take advantage of advances in technology regulation (internet services, user relations …) to outperform its competitors and lead the market thanks to the most efficient and effective regulation-based solutions that allow, for example, standardization in customer acquisition.
RegTech solutions help enterprises innovate being aware of possible future regulations that can affect their innovations. When a company wants to digitally transform or develop an innovation, it must never forget the regulatory aspect.
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Outstanding RegTech regulations
All states, specially developed and developing countries, have extensively set technology regulations. And those that still have not, now include international standard regulations in their legislation or are currently working on developing their own.
However, regarding digital identity, provision of online services and remote acquisition of clients, Europe is the pioneer area. In addition, many Anglo-Saxon and Asian countries are referencing their standards to develop and update theirs.
AML5 (and the future AML6) allows, for example, online customer bank account opening in seconds via their mobile phone anywhere. Together with eIDAS, AML European regulations give companies the opportunity to access a market of more than 500 potential clients at one click with total process security, transparency and legal guarantees.
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RegTech leading companies
RegTech companies have emerged to help organizations and companies from all sectors and areas to be more efficient in their compliance, accompanying legal departments or running as these ones in an externalized way taking advantage of latest technologies. These consultants advise companies on the regulatory matters that affect them so that the compliance process is automatic, agile and reliable.
Likewise, RegTech companies develop innovative technological solutions that allow them to innovate in their offer of products and services, increase their sales and optimize their processes to be more efficient in any business area while not forgetting the regulatory aspect.
Check out 2020 RegTech companies in this article.
Innovative RegTech solutions
Many RegTech companies develop proprietary solutions that enable their customers to drive their businesses and grow through digitization and regulatory compliance. Disruptive and quality solutions based on technology that comply rigorously with current regulations and adapt to future ones.
VideoID, SmileID and SignatureID are examples of RegTech solutions that are helping dozens of companies to lead their respective sectors by leveraging technology regulations and the digital approach to sales.