RegTech is the New Black - The Growth of RegTech Demand and Investment

Kari Larsen () and Shariq Gilani ()
Additional contact information
Kari Larsen: Reed Smith LLP, Postal: 599 Lexington Ave., New York, NY 10022, USA, http://www.reedsmith.com
Shariq Gilani: Reed Smith LLP, Postal: Broadgate Tower, 20 Primrose Street, London EC2A 2RS, United Kingdom, http://www.reedsmith.com

Journal of Financial Transformation, 2017, vol. 45, 22-29

Abstract: The financial services industry has undergone significant changes over the past decade, due primarily to technological innovations and regulatory change. In recent years, financial services regulatory requirements have dramatically increased, and the costs of compliance have increased correspondingly. Various regulations in the U.S., Europe, and worldwide have together greatly increased capital, recordkeeping, reporting, administrative, and other compliance costs, significantly raising the barriers to entry. FinTech is broadly defined as technological innovations that support or enable banking and other financial services, potentially disrupting the financial services sector and/or making it more efficient. RegTech is a subgroup of FinTech, described as technology that is providing solutions to companies across all sectors of financial activity to ensure that they are able to comply with regulatory requirements. Increased regulatory burden has created high demand for new technological solutions to regulatory challenges. Whilst regulations are becoming increasingly prescriptive as to the result to be achieved (e.g., what details of trades must be reported), they generally are not prescriptive as to how to achieve the required result, so the methods of compliance can be varied. RegTech innovations have the potential to increase margins for companies subject to a myriad of multi-jurisdictional requirements and to allow for competition by creating a path for a less expensive entry for startups into heavily regulated industries. In this article, we discuss the potential regulatory burdens placed on financial institutions and startups, and the related costs, potential solutions being offered, recent investments in RegTech, and what we see for RegTech in an uncertain future.

Keywords: Portfolio Choice; Investment Decisions; Government Policy and Regulation; Venture Capital; Banks; Regulated Industries and Administrative Law; Cyber Law; Innovation and Invention: Processes and Incentives; Management of Technological Innovation and R&D; Government Policy (search for similar items in EconPapers)
JEL-codes: G11 G18 G28 K22 K23 O31 O32 O38 (search for similar items in EconPapers)
Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:ris:jofitr:1590

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