RegTech, a new innovation playground
The world is changing fast, what makes it fast is the circulation of information and the movement of mass. Well we can call this the acceleration of chaos too. In this acceleration of chaos, more and more combination of cases, opportunities and challenges arise. Can the chaos be controlled or at least be surrendered?
When regulations are costly and complex to handle, it is time to simplify things. Simplification and streamlining are great ways of surrendering the chaos and today that seems possible thanks to the technology. Over the last couple of years, technology providers have offered to the regulators RegTech solutions to assist them in managing risk and regulatory compliance. RegTech integrates several axis of technology, advanced data analytics, machine learning, artificial intelligence, body parts recognition to improve the quality of insights, decision making and control. RegTech gathers the regulatory authorities, professional services, entrepreneurs, financial institutions and consumers around the values of the community of service.
RegTech startups create platforms and business models to allow their clients to manage compliance between regulators, businesses and individuals while making the experience easy, efficient, flawless and cost effective. When the risk and regulatory compliance become pain free, cost effective and real-time, in other words easier to apply, its adoption become faster and its impact become wider as well as preventive and forward looking.
There are several RegTech use-cases currently active in the market such as anti-money laundering (AML) and fraud prevention, compliance monitoring with robotics, robo-advisory to advise customers on regulatory requirements, behavioral analysis and surveillance for identity checks. According to CB Insights, RegTech raised globally approximately 5 billion USD of investments in disclosed equity funding, with over 580 deals across these main use-cases. When we look at the geographic split of these investments, 74% are realized in USA, 10% in UK, 3% in Canada, 3% in India, 2% in Israel and 9% in rest of the world. Globally, it is estimated to be 700 RegTech companies. The largest RegTech related deal so far was registered for a Canada based firm, Intelex Technologies, a HSE, quality control and assurance software provider, created to manage compliance throughout the customer lifecycle. The company raised 122 million USD from 3 PE investors in a single round.
The key verticals in the RegTech space can be stated as enterprise risk management, tax management, reporting, portfolio risk management, vendor risk management, AML / KYC, government and legislations, health care, identification and cybersecurity. One of the rising RegTech star in the AML / KYC space is London based Onfido. The company is also selected as one of the RegTech start-ups to watch in 2017. Onfido allows financial service firms to comply with anti-corruption driven “know-your-customer” checks and anti-money laundering rules. The company that received 30 million USD of investment so far supports its clients to remotely onboard more users, cut costs and reduce risk. By early 2017, the company executed millions of identification checks globally and among its clients are the well-recognized Fintech players such as Nutmeg and GoCardless.
In tandem with the rise of Fintech and e-commerce, RegTech will continue to grow and RegTech startups will continue to surge. There is still so much to do to ease the burden of regulations, so innovation playground is wide open and green.
