Intro
It’s 2024 already, and with that, we have all come to the realization that trends are no longer bound to clothes, make-up, or influencers alone! In today’s world, one that is driven by technology and perhaps at some point nothing but technology, we’re starting to see some novel trends such as the ones we’re witnessing in the financial sector. With each day that passes, we come across innovations and solutions that aim to facilitate and digitize the way payments are handled.
And between this innovation and that, you must have heard of a term such as “FinTech”; a term cut short for the words Financial Technology. So, do you know what it means? If yes, then you are about to become familiar with yet another rising term known as “RegTech”, or Regulatory Technology.
Both terms are highly associated with one another, however, the difference remains still and today we’re walking the grey area between both to give you the black and white you’re thirsty for!
What is FinTech?
The term FinTech or Financial Technology is used to describe solutions and innovations driven by technology with their main goal revolving around simplifying and facilitating the way financial activities are executed on various levels for all sectors. This means relying on automated alternatives that provide better delivery results for customers using the service and companies selling it.
FinTech solutions replace manual methods previously implemented and practiced with automated solutions. Thereby, speeding up the process and allowing customers to get the outcome they need without needing other party’s help to get it done. It does so by achieving the most with the least bit of intervention to carry out the process.
The most recognizable services and solutions that we have been using in our day-to-day life that fall under the FinTech solutions umbrella include things like online money transfers, getting tasks done via online banking services instead of an in-person visit to the bank, issuing & receiving E-invoices, cryptocurrencies, and more. All of these serve the same goal; to get the most while spending the least time to get it done while ensuring unmatched quality service, accurate results, and high levels of security.
What is RegTech?
Similar to FinTech, RegTech (Regulatory Technology) relies on technology for the solutions it offers so that the old-fashioned practices usually found in the financial industry can be replaced with modern ones that speak the voice of the tech era we’re part of shaping as we speak. However, RegTech companies specialize primarily in providing automated regulatory compliance solutions.
But What Does That Mean?
In much simpler words, RegTech is the type of company you’d go hunting for if you need to ensure that your organization adheres to the rules and regulations in order to maintain compliance with your country’s legislation; but with lower cost and higher efficiency. This is done through solutions that rely less on the human factor and manual check-ups.
What Does it Include?
RegTech helps organizations keep track of various types of transactions in real-time to prevent troubles before damage is done. As a result, it empowers its users to achieve tasks such as risk management, identity authentication & verification, identifying irregular employee behaviors, recognizing unauthorized transactions, and more.
However, be aware that RegTech isn’t the same for all companies or service providers offering it as it covers various aspects such as Fraud Detection, Audit Trails, Data Compliance Management, and Employee Surveillance among others.
The choice depends on your needs, so if you aim to target a suspicious credit card activity for example, then you’ll have to choose a company that helps you get that tracked down to avoid data breach risks among other issues associated with it instead of going for advanced data analytics management solutions as it’s not your primary goal at this point.
This doesn’t negate the fact that some companies do offer Regulatory Compliance services for various fields, but doesn’t also mean all RegTech companies will have it all covered in one place.
RegTech or FinTech, Which One To Choose?
Still at a crossroads of the choice you need for your organization? Stick with us to stay involved and informed as you may end up with one or you know what? Perhaps two! Because each serves a unique purpose. Depending on your business needs, this may be an eye-opener for you to decide whether you should implement both or one only.
How to make the choice?
First thing first, recognize your business needs. For this you’ll need to go over the niche your business is covering and look up the requirements to keep it running. In simpler English, let’s say you own a financial institution that offers services online with daily transactions happening by customers.
If your goal is to facilitate the payment process for them or keep a record of the invoices and transactions happening then your better option would be a FinTech solution that governs that.
But if you’re looking to prevent fraud, mitigate money laundering, or track suspicious employees or customers’ behaviors then your go-to would be a RegTech solution to supervise the overall performance of your organization and implement the right measures.
Example of How to Utilize A FintTech Solution of The Aforementioned Scenario:
– Using an E-invoicing software to issue and receive all invoices via one centralized system that manages the process with automation tools instead of manual check-ups.
Example of How to Utilize A RegTech Solution of The Aforementioned Scenario:
– Using a Know Your Customer (KYC) tool to help you verify and identify the information customers enter as they register or request any of your services. This includes information such as national ID cards, contact info, source of income, passport, and more according to the type of service the client is applying for and its required info.
After determining your business needs, weigh your options for the budget, features, and goals you plan on achieving so you can determine if you need a FinTech solution, RegTech solution, or both.
In a Nutshell,
RegTech helps financial institutions achieve regulatory compliance by automating and streamlining their regulatory processes. Adapting automated alternatives is meant to ensure legal compliance with complex regulatory requirements. Automated reporting, risk management, and identity verification are all part of RegTech solutions.
FinTech, on the other hand, doesn’t consider the legal part of ensuring compliance as much as it aims to create a financial solution that helps solve a problem or facilitates the way things used to be done traditionally. It does so by incorporating technology to provide automated solutions instead. FinTech targets businesses and their customers by providing centralized solutions that consider everyone.
