You Think That RegTech’s Market Is Too Niche ? Think Twice

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By FINTECH Books Contributor, Edouard Estour
Follow: @EEstour

As observers familiar with the RegTech phenomena know well, it is the breadth of financial regulations enacted after the 2007-8 crisis that spurred the emergence of a new kind of technology companies. These companies have leveraged big data, machine learning and blockchain to help their customers comply with new, challenging laws.

Indeed, banks’ IT infrastructures were not ready to absorb an unparalleled new level of complex monitoring and reporting mandates. Faced with tight deadlines, many of them had no choice but to turn to start-ups offering quick way-outs thanks to radically new technologies.

But still. Isn’t it a striking fact that relatively IT-intensive companies like big investment banks could not cope? Some of them, such as Goldman Sachs, spend as much as 10% of their revenue on technology. For Goldman that’s about $3 billion.

The problem is that we’re now witnessing a global trend towards setting banking risk management obligations as a sort of regulatory gold standard, which inspires non-financial laws: anti-corruption, economic sanctions and multiple industry-specific regulations (pharmaceuticals, defence, foods) have all been tightened (either by the legislator through stricter laws, or by the agencies through stricter enforcement).

The question is worth asking, even if it is slightly provocative : how can we expect non-financial, less techno-friendly firms to comply efficiently with bank-level reporting obligations if all the Goldman Sachs of the world already struggle to do so ?

In our article, based on concrete examples, we’ll explore how RegTechs may provide simple and cost-effective answers for non-financial companies to comply with ever-stricter monitoring and reporting mandates.

As observers familiar with the RegTech phenomena know well, it is the breadth of financial regulations enacted after the 2007-8 crisis that spurred the emergence of a new kind of technology companies. These companies have leveraged big data, machine learning and blockchain to help their customers comply with new, challenging laws.

Indeed, banks’ IT infrastructures were not ready to absorb an unparalleled new level of complex monitoring and reporting mandates. Faced with tight deadlines, many of them had no choice but to turn to start-ups offering quick way-outs thanks to radically new technologies.

But still. Isn’t it a striking fact that relatively IT-intensive companies like big investment banks could not cope? Some of them, such as Goldman Sachs, spend as much as 10% of their revenue on technology. For Goldman that’s about $3 billion.

The problem is that we’re now witnessing a global trend towards setting banking risk management obligations as a sort of regulatory gold standard, which inspires non-financial laws: anti-corruption, economic sanctions and multiple industry-specific regulations (pharmaceuticals, defence, foods) have all been tightened (either by the legislator through stricter laws, or by the agencies through stricter enforcement).

The question is worth asking, even if it is slightly provocative : how can we expect non-financial, less techno-friendly firms to comply efficiently with bank-level reporting obligations if all the Goldman Sachs of the world already struggle to do so ?