The fast-paced advancements are eliminating the stereotype that finance is a boring industry. Financial technology provides cashless systems, digital cards on smartphones, and, of course, the safety and security of these transactions to a variety of customers. The market is booming with expected growth of 16.8%, which amounts to $681.6 billion by 2028.

There are many types of FinTech software development services, including regulatory technology — RegTech — that services compliance and risk teams. It has experienced market growth of over 73% since 2017, so it’s no wonder that 78% of startup deals utilized it that year.

Both new technologies are a huge point of interest to the financial and banking industries, but what’s the difference? This article will show the distinction between FinTech and RegTech.

In this article:

  1. What Is FinTech?
  2. What Is RegTech?
  3. RegTech Innovations for Financial Institutions
  4. RegTech Companies You Should Know
  5. Conclusion

What Is FinTech?

FinTech is a business solution that offers new ways of delivering traditional financial services. Financial technology manages, records, and stores important transactions, delivering complex entries in seconds. Blockchain technology, internet banking, and mobile banking are examples of FinTech.

FinTech development services provide safety and security to businesses that want to create such solutions, taking into account FinTech regulations. A small error or fraud in the balance sheet would harm the business's reputation and have a ripple effect. Instead, robotic process automation (RPA) ensures transparency and provides backup for essential data.

Why Do We Need FinTech?

FinTech platforms have the potential to transform the financial aspect of businesses. Whether you’re paying insurance or checking stocks, the need for such technology is growing. Here are some reasons why:

  • Easier access to financial services. FinTech is a game-changer for countries where infrastructure hasn’t developed. As long as there is mobile or broadband internet, you can, for example, open a bank without a physical location.
  • Safety and security. The traditional approach has loopholes in data security. Because of that, fraud or scamming becomes a critical issue. However, FinTech solutions provide high transparency and cybersecurity and enhance consumer protection.

FinTech is a transforming solution for the financial industry and many businesses, as it facilitates online payments and wire transfers. Let’s look at the major technologies supporting FinTech.

FinTech and RegTech differences

Main Technologies Supporting FinTech

The USP of FinTech technologies is that they understand the nature of businesses. Here are some leading technologies that support fintech.

  • Artificial intelligence and machine learning – build a detailed user profile and predict behavior
  • Blockchain technology – creates transparent and secure solutions
  • Robotic process automation (RPA) – automates financial processes
  • Internet of things (IoT) – develops mobile POS systems

Aside from this, FinTech employs several cybersecurity standards to protect data for these solutions.

Now that we have a better understanding of FinTech, let’s look at another valuable asset of the financial sector, RegTech.

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What Is RegTech?

RegTech or regulatory technology helps businesses with compliance processes and ensures financial institutions adhere to the regulations.

Since the 2008 global financial crisis, regulations worldwide have changed significantly. Today, they are more complex and, thus, more challenging to achieve compliance. As an emerging technology, RegTech solutions are transforming the regulatory landscape of the global markets.

How Can RegTech Assist Your Organization?

Today, the financial sector is armed with RegTech tools and applications that benefit compliance divisions with the increasing regulatory environment. Here’s how RegTech assists enterprises.

  • Lower fines. With RegTech, it's easier to follow up with the strict regulations that authorities roll out, as financial institutions can monitor the changes in requirements in real-time.
  • Prevention of legal ramifications. RegTech solutions help paint a more detailed picture of any client’s financial history and reduce the possible dangers of money laundering, funding to terrorist groups, and other fraudulent activities.
  • Enhancement of responsibilities. The automated approach to compliance processes helps identify suspicious activity much faster than if done manually, reducing the time needed to recognize and report a crime.

To follow up with compliances, RegTech supports major technologies. Let's understand them.

Main Technologies Supporting RegTech

RegTech assists with cost-effective and efficient solutions that enable businesses to meet compliance and regulatory conditions. Below are technologies supporting RegTech and why you may need them:

  • Artificial intelligence and big data – validate which regulations apply to your business
  • Blockchain technology – accesses real-time changes in requirements
  • Machine learning – traces variations in new laws
  • APIs – create reporting systems
  • Data mining – supports better decision-making

It’s also worth mentioning that cloud computing and SaaS technology help make these solutions more accessible.

RegTech technology helps businesses by assisting with regulations. But, RegTech benefits financial institutions too.

FinTech Regulation

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RegTech Innovations for Financial Institutions

RegTech technologies can shape the finance industry and provide solutions by associating with FinTech technology.

  • Regulatory Sandbox. Regulatory Sandbox is a platform for businesses seeking to comply with the regulations of Europe, Australia, and the United States of America. It provides analytical information based on data, so business owners can make informed decisions and exercise execution practices.
  • RegTech as a Service (RaaS). RegTech as a Service (RaaS) fosters financial institutions to view RegTech as technological development to enhance working efficiency and regulations. RegTech is expanding by analyzing the wealth of internal and third-party data using bulk storage and artificial intelligence

RegTech is an emerging technology, and some enterprises are serving clients globally.

RegTech Companies You Should Know

Startups in the RegTech industry are relatively new, and entrepreneurs with vast experience are helping clients, not only with compliance but with criminal offenses. 

  • ChainAlysis. ChainAlysis is a US-based blockchain analysis enterprise that develops blockchain databases for public and private enterprises. The company also develops cybersecurity software, including anti-money laundering software for bitcoin. 

The company’s product portfolio includes REACTOR, an interactive investigation tool to identify criminals, visualize data, generate results, and deliver them to clients.

  • ComplyAdvantage. ComplyAdvantage is a UK-based RegTech firm that provides financial crime risk data and detection. The firm’s focus is to counter the threat of money laundering, funding to terrorist groups, fraud, and other financial offenses. 

ComplyAdvantage serves over 500 enterprises in 75 countries to mitigate financial crime risks. The company identifies daily risks from millions of structured and unstructured data points.

  • Ascent Regtech. Ascent Regtech is a regulatory solutions firm that streamlines the compliance process. The company works with AI-driven technology and human expertise to help businesses across industries with regulations, specifically the financial sector, by maintaining regulatory changes and reducing the risks of financial institutions and banking services.
  • Forter. Forter is an NYC-based enterprise that delivers fraud prevention solutions to online business owners and entrepreneurs. The firm aims to create a fraud-free infrastructure for online business owners through which they can make decisions that benefit their businesses. 

The company’s system is consumer-centric, accurately detecting offenses while enabling growth by increasing approvals and providing a better customer experience.

Despite being new, RegTech holds immense possibilities for mitigating risk and easing compliance.

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Identifying risks and enforcing the right tools to reduce them is the key for the FinTech industry to grow and evolve. Today, businesses are operating with the many FinTech solutions available in the market, but as long as there is the presence of RegTech solutions, enterprises can work smoothly and effectively.

Want to transform your business in the era of digitization? If you want to develop a FinTech or RegTech solution, our outsourcing services are ready to serve you. At Geniusee, our experts provide innovative solutions so that you have a competitive edge in the market. Get in touch today to find out more.