Regtech comes of age

by Christian Burgin CPO, Visible Capital

Covid-19 has taught us how to do a lot of things at arms length - hug our friends and family, take a yoga class or have a Friday beer with colleagues in our different gardens.

And it’s the same in our work environments - as we’ve said before in these blogs, the pandemic has hugely accelerated the pace at which the technology revolution has accelerated and how we have learned to do so much more remotely.

According to a global study by the World Bank and the Cambridge Centre for Alternative Finance (CCAF), examining the take up of fintech by central banks and other financial authorities during the pandemic, the research shows that digital financial services and fintech have also expanded significantly to facilitate continued transactions at the newly-required arms length position.

The report highlights the impact of this acceleration not just on fintech but on regtech, a term apparently coined by the Financial Conduct Authority in 2015 to describe “a sub-set of FinTech that focuses on technologies that may facilitate the delivery of regulatory requirements more efficiently and effectively than existing capabilities”.

The World Bank report identifies some of these recent regtech innovations: 

“In many cases,  financial regulators have taken steps to support the shift to digital channels, including waiving fees  temporarily on digital payments, increasing limits for digital transfers and allowing for electronic know-your-customer (e-KYC) in lieu of in-person identity verification. Digital channels have been leveraged  to quickly and efficiently deliver Covid-19-related relief payments to both individuals and firms. Digital saving, lending and investing products and services have also enabled consumers to manage their  financial lives virtually, helping to reduce the need for in-person interaction.”

The study, which gathered responses from 118 central banks worldwide reported that 60% of respondents reported an increase in the use of digital payments and remittances, while 22% recorded more use of digital banks and 19% saw an increase in digital savings and deposits. Interestingly, respondents in jurisdictions with more stringent Covid-19 restrictions and closures are more likely to have reported an increase in digital payments and remittances services. 

And regulators are stepping up too, with 37% of surveyed regulators having taken at least one regulatory measure specifically related to the fintech sector during the pandemic. Looking forward, the report also highlighted that regulators felt that, in order to support their work on fintech in light of Covid-19, 80% considered they would most benefit from skills development and 67% identified the need for technical support. 

At Visible Capital we have been working closely with banks and financial organisations over the last few months and our discussions and strategising have very closely reflected the global findings of the World Bank report. The financial institutions we have been working with are very aware that the digitalisation of their financial services must be developed in tandem with an equal emphasis on the digitalisation of their financial regulation. This means they are best equipped to deal with the future, providing cutting edge services to their clients while also improving the efficiency of their organisations.

Back in 2015, the FCA described regtech as a subset of fintech. Perhaps its time to argue that regtech has come of age and is an important process of transformation in a class of its own.