Technological and regulatory developments are changing the nature of ﬁnancial markets, services and institutions in ways that weren’t imagined before the 2008 global ﬁnancial crisis. This evolution has led to the realization that the future of technology and the future of finance are increasingly interwoven. Financial services are rather complex, and today it is also the most regulated industry on the planet. Even though advances in technology have created prominent possibilities in finance and banking, the progress has not been as fast as many experts had predicted. One fundamental reason for this is regulatory overhead that impacts the finance industry significantly.
The real innovation in the fintech industry lies in startups that tackle regulatory challenges face to face. While many technology companies merely think about regulatory risk, FinTechs have to think about regulatory opportunity. In fact, the evolution of FinTech requires parallel development of RegTech and the true potential of RegTech lies in its ability to enhance digital transformation and evolve from a “big data” to a “smart data” approach. As we at b.fine would say: from regulatory reporting towards regulatory intelligence. This means enabling financial institutions to process and analyze the data that regulators request to create actionable insights.. Other key differences between traditional solutions versus the RegTech era solutions are agility and cloud capabilities that allow greater flexibility, security, scalability and a lower TCO. Although regtech and fintech go hand in hand, it is expected that RegTech will drive the growth in FinTech for the next decade.
One of the recipes for a successful FinTech startup is to deliver a RegTech solution that allows businesses to choose an option that they otherwise would have found inaccessible due to the compliance barrier to entry. Today, providing the best experience for clients does not merely mean providing better terminals, payment pages and reporting than other solution providers. It involves building compliance into the product so that the client could comply with the regulation—without any additional technology process or legal overhead. In finance, the limitations of web technologies are not considered the challenge anymore, compared to the regulatory overhead and related issues such as innovating while managing regulatory compliance of the governing constructs. This is the exact sweet spot where RegTechs have the opportunity to offer a much more refined and relevant value proposition.
Compliance might be seen as a barrier, but that is where fintechs can make a difference: by seeing compliance as an opportunity instead of a barrier. The extent and speed to which financial innovation is making its way in the fintech world, however, depends on how fast the regulation is evolving. New and more complex regulations tend to serve as a wake-up call for institutions that have been managing their regulatory reporting on legacy systems for way too long. By rediscovering the technological potential of the fintech market, the finance industry can find a partner to cooperate with that takes care of the whole regulatory reporting supply chain. Making compliance seamless and offering banking institutions peace of mind in their regulatory processes are the challenges that b.fine handles effectively. It’s safe to say that RegTechs are indeed becoming an inherent and very important part of the fintech world since it is a discipline that relieves the burden of regulatory reporting teams significantly.