March 17, 2023
Estimated reading time: 4 minutes
Fintech vs Regtech: what is the difference?
Fintech and Regtech are two of the most popular terms in financial services today. But it can be hard to define the two and distinguish between them in the chaos of the financial markets. This blog will address the differences between fintech and regtech, alongside the best way to work when new financial updates are released.
What is Fintech?
Fintech, or financial technology, refers to the automation of financial activities. These days, almost everything in finance is linked to technology so that it can connect with other services and provide a smoother experience for the customer.
The term ‘Fintech’ was first coined in 1993, before internet banking was a mainstream service. Although it’s well-established, companies in Fintech are continuing to push innovation boundaries. In fact, it is one of the most popular categories for new start-up ideas twenty years after first usage, and the financial industry is the most-invested sector for start-ups.
Fintech is often born out of the need for solutions created to address specific problems in finance. For example, challenger banks (also known as neobanks) have increased financial innovation by creating budgeting recommendations in their apps.
Alternatively, credit unions have been able to expand their offerings to credit-averse individuals by looking at more detailed transactional data that wasn’t available in the past. By gaining access to info on repayment regularity, lenders could offer more solutions to customers without increasing their own risk.
Unfortunately, the expansion of financial technology products and services has led to higher rates of fraud, cybersecurity threats, and attacks. That is where RegTech comes in.
What is Regtech?
Regtech is one arm of the Fintech umbrella. It refers to regulatory technology, meaning the solutions available for companies to comply with the regulator.
Financial regulation exists to protect consumers and hold businesses accountable, making sure they follow industry standards and best practices. One of the most well-known legislations is around anti money laundering, which is regulated by the Financial Conduct Authority in the UK.
But implementing strategies for compliance can be both complicated and costly. Moreover, developing the in-house resources (such as big data programs or even new technology) to meet the demands of supervisory authorities is just not possible when you consider the fast-moving pace of regulatory challenges.
The term Regtech was first coined in 2015 by the FCA, who defined it as “the development and adoption of new technologies that facilitate the delivery of regulatory requirements”. As an industry that’s pretty new, it’s still growing as the likes of artificial intelligence develops.
Different types of RegTech are available, from ‘done-for-you’ automated regulatory intelligence for large businesses, to intuitive compliance recommendations for entities that are still growing.
Let’s take a look at an example of how RegTech is used today.
Before working with a RegTech solution, Revolut relied on manual internet searches and a simple excel spreadsheet. Not only did this increase the risk of financial damage in case the team missed a regulatory update, but it also slowed the growth of the company overall.
Now, the firm accesses watertight regulatory information using CUBE’s RegPlatform. With full oversight, the team can track updates and their own efforts towards regulatory compliance, checking off tasks and re-prioritizing whenever they need to. The team at Revolut, a huge financial institution, are now able to access international regulations as they continue to grow globally.
What are the key differences between Fintech and Regtech?
Here is a table to help explain the main differences between Fintech and Regtech:
|Overall umbrella term for any technology solution as a financial service||One arm of fintech, specific to supporting firms to comply with financial regulations and help companies with risk management|
|Now well-established, first conceived in 1993||Fairly new industry, first conceived in 2015|
|Helps the financial sector solve problems with technology, digital programs and cloud-based solutions||Helps financial institutions stay updated with regulatory changes, adhere to legal requirements and prevent financial crime|
|Overall aim to innovate, increase market participation and confidence or trust||Overall aim to protect customers from poor practices and standardize the fintech industry|
How can you get RegTech support?
Regtech exists to guide your financial firm around the nuances of regulations, and help you comply. For most companies that operate at a larger scale, there is just too many regulations to manage this on your own. Not to mention keeping up with all the different rules if you operate globally, as well as regulatory reporting in various jurisdictions.
CUBE is here to help.
CUBE offers different solutions to suit your needs. Most importantly, though, all of CUBE’s technology includes the tools to help you automate regulatory intelligence. Instead of chasing the rules and updates. Experience a digital transformation and feel confident in your compliance strategy.
Request a demo with CUBE today to find out how your compliance team can benefit from automated regulatory intelligence.
Keep ahead of emerging regulations and guidance by speaking to CUBE.