What is RegTech? – Why we need to differentiate RegTech from FinTech
By Luke Battah, CEO, PASS Technology
Everyone seems to be talking about FinTech and its newer sister buzzword, RegTech.
In many cases I find there is a lot of confusion around what these two phrases mean and they are often used interchangeably.
If you Google ‘RegTech’ you will find a Wikipedia article which refers to RegTech as a ‘subclass of FinTech’ and something that ‘benefits the finance industry’.
This is frustrating because, in my experience, RegTech is a much broader term than FinTech. Regulation affects every business, not just the Financial Services industry.
So, what I thought I’d try and do is spell out the differences as I perceive them. Hopefully I’ll be doing my little bit to spread the word to companies and organisations about the benefits RegTech can deliver.
What is FinTech?
To start with we need to understand what we mean by FinTech, where the word came from and what it does.
FinTech is defined, again by Wikipedia, as a ‘financial industry that applies technology to improve financial activities’. What this means is it uses technology to improve the financial products and services available to consumers. Often associated, but not wholly restricted to, disruptive start-ups, FinTech can be anything from flexible credit cards, online banking or spending apps. In the main FinTech improves accessibility, making use of open banking laws and APIs.
It’s a booming industry and one that has improved the way average people interact with their finances.
What is RegTech?
RegTech, on the other hand, is a newer buzzword and refers to technology that helps businesses cope with regulation and maintain compliance. It uses technology, often Software as a Service (SaaS), to help businesses operate more efficiently and effectively in a world of ever-increasing regulation.
RegTech in Financial Services
There is a lot of regulation in Financial Services, so it makes sense that some of the most immediate examples of RegTech operate in that space. Since the 2008 crash the industry has been under a lot of scrutiny with multiple layers of regulation applied to minimise risk and increase accountability.
RegTech outside Financial Services
RegTech has really grown as an industry due to the increased levels of regulation and businesses’ difficulties in staying up to speed. As stated in the paragraph above, the 2008 crash resulted in a lot of new regulation and scrutiny but this is far from the only cause of new regulation.
One of the greatest drivers in the need for new regulation is technology. Technology has changed the way we live our lives and because of this, issues such as privacy, security and identity have come to the fore.
Smart phones, coupled with 4G and increased broadband availability, have hugely increased the accessibility and fluidity of consumers. People can now contact businesses and be contacted wherever they are and across devices.
The General Data Protection Regulation (GDPR) is just one example of the level of scrutiny being applied to how businesses operate in an ever more regulation heavy environment. Regulation that is required to maintain the safety, security and well being of everyone.
This is just one example of regulation that businesses need help navigating that is not solely restricted to the Financial Services sector. In short, complex regulatory requirements are not unique to banking and financial services.
Think broader than Financial Services when you hear ‘Regtech’
The point I’m trying to convey is that RegTech doesn’t mean FinTech. Regtech can apply to a wide variety of verticals. Think of the amount of regulation in Healthcare, Education and Logistics for a start.
Here at PASS Technology, for instance, we are a technology company that helps businesses ensure the people they are employing are qualified, legal to work and not a danger to customers, staff and the company’s brand.
The scrutiny and corresponding regulation surrounding background checking has been increasing heavily over the past few years and traditional suppliers of background checking solutions (mostly outsourcing to teams) are struggling to keep up. More regulation means more compliance which means a slower process overall. Our solution provides a central location for the checks and speeds up the whole process while embedding compliance processes at every stage.
In this way we are a RegTech company – our solution helps businesses cope with increased regulation. And without doubt it’s not just for the Financial Services industry.
Luke Battah is Chief Executive Officer of PASS Technology
For more information on PASS or to understand how we may help you please contact us.