There are fintech firms that can support in complying with regulations. They are described as regtech. They apply innovation to give solutions to the difficult challenges of getting compliance with regulatory requirements. The FCA describes them as a subset of fintech initiatives that focuses on technologies that may facilitate the delivery of regulatory requirements more efficiently, effectively, and economically than existing capabilities.

The goals of regtech companies in supporting financial institutions include:
New regulations: The introduction of new regulations presents a series of challenges from understanding the regulations, scoping for individual organizations, strategic and operational planning of resources for implementing modifications or new applications. The time to respect the new regulations is usually quite short.

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Present regulations: Financial institutions need to assure continuous compliance that may be in the form of reporting, audits, respect of government requirements, and so on.

Regtech initiatives give the following solutions:

• Compliance and conduct analytics: conduct risk analysis matrices
• Regulatory compliance automation.
• Regulation-specific on-demand service documentation and audit
• Employee surveillance: behavioral assessment, voice, and electronic communication screening
• Fraud prevention: anti-money laundering (AML), transaction monitoring, and fraud detection
• Reporting and fraud detection: on-demand, user-tailored compliance risk reporting
• Compliance data warehouse and case management

Ernst & Young Global Limited categorize regtech solutions concerning what they offer:

Fraud prevention
– These solutions monitor transactions in real-time to identify gaps, issues, and trends in financial malpractices. Prevention can reduce the risks and associated costs of losing funds due to fraud.
– Companies can utilize analytical capability for examining an extremely large number of different data points to identify potential threats to financial security.
– Solutions can support, in real-time, verification of decisions for their compliance. In this way, regtech solutions can also help in the operational field.

Regulatory compliance automation
– Regtech platforms can potentially support interpreting regulations, and include upcoming changes.
– Several regtech initiatives are addressing the key challenges to build a converged regulatory risk and controls management framework.
– Robotics can perform routine compliance monitoring and testing processes.
– Robo-advisors use sophisticated algorithms to provide customers with automated advice without human intervention.

Conduct and culture
– Solutions to behavioral profiling and behavior-driven risks to indicate potential misconduct and map out the company culture
– The quantification of the impact of cultural change initiatives

Predictive analytics
– Analytics can support in forecasting organization-specific operational and regulatory risks.
– Analytics can help in finding the root causes of previous regulatory breaches. It can utilize them to predict potential risk areas and disruptive events in the financial markets. It can also support possible remediation.

The one single biggest benefit of regtech solutions is in supporting a multi regulatory environment. Many regulations have in common the same data, processes, or governance structures. This often leads to the multiplication of efforts for financial institutions. The implementation of a regtech solution can allow financial institutions to avoid such duplication or multiplication. It can empower them to achieve organizational effectiveness, efficiencies, and economics.

Regtech solutions are interesting for professional organizations that currently provide personnel to do the job. In this way, they can move from providing services to providing products. High-end professional service firms that work for corporate clients have a clear upside. Because they provide specialized expertise, their offerings can be very lucrative. There is a downside. If a consulting company wants to double its revenue, it has to double its staff of consultants. Technology offers these companies a way out. They can leverage the power of algorithm-driven automation and data analytics to “productive” aspects of their work. They can increase their margins as they grow while offering better service to their customers at prices that competitors cannot match. An interesting solution for example for compliance professional services is to move to regtech solutions.

There is a large amount of activity in the field of regtech initiatives. There will be more such activity in the future with the availability of better and effective solutions and the expected need to comply with more regulations. The idea of regtech itself presents an excellent opportunity for financial institutions. It can help to address the heavy and time-consuming activity of regulatory compliance.

An interesting development is the use of AI in regtech initiatives. This means not only the automation of ordinary activities associated with compliance. It would also mean using Robo-advisors or neural networks for performing complex activities that currently require professionals.


The current regulatory approach is subject to significant political economy and coordination costs. Therefore, this makes it hard to deliver structural change. Fintech initiatives, on the other hand, can bring deep changes, but they are likely to create significant regulatory challenges.

Up to now, traditional financial services have responded largely by collaborating with fintech startups rather than seeking to acquire them. The digital transformation offers huge growth potential for the financial sector. The necessary regulatory changes mustn’t make it difficult to innovate while providing the stability the system needs to meet customer expectations and reduce risks and hassle for them.

Regtech initiatives could support with new and interesting solutions.

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