When we’re asked to describe what we do at Ascent, we strive to educate our customers and partners on a new, burgeoning industry: “RegTech,” short for Regulatory Technology. We’re often mistakenly lumped into the exploding “FinTech” community, but this characterization isn’t wholly accurate. FinTech, in its standard accepted form, is the application of technology to traditionally service-oriented financial services industries. RegTech, conversely, is the application of technology to traditionally service-oriented regulatory offerings on an industry-agnostic basis.
RegTech companies are able to choose their industry just like how a consultant chooses a specialization or a student chooses an academic major. For example, Ascent has chosen to focus on financial services regulation.
Why is RegTech a growing field?
Simply put, existing service offerings are too expensive, and the cost of compliance is increasing dramatically for regulated entities. Government studies reveal an endless series of eye-popping numbers regarding the complexity and cost of regulation. Cost-side efficiencies abound to companies who produce RegTech products, and distributed networking, big data analytics, and disintermediation have all played their part.
But this doesn’t answer an even more basic question: Why do these companies exist?
The answer is two-fold. First, the velocity of regulation is increasing. We’re regulated by multiple different organizations, and administrative and regulatory laws are increasing in number. (The legitimacy and legality of such activities should be—and is—constantly scrutinized.)
We write laws with computers, but follow them with sticky notes and spreadsheets—an unsustainable juxtaposition. Let’s look at a brief case study in Europe.
Europe has operated in a quasi-federalist state since the implementation of the European Union. It’s no mistake that RegTech has taken off in the face of such complexity, where inter-jurisdictional issues and cross-border disputes abound. Using RegTech to follow, and comply with, the tangled web of rules is increasingly necessary to ensure the crossing of t’s and dotting of i’s.
This evolution is akin to the development of a major city. Transportation is easy to coordinate and plan in the early days. But, following 200 years of growth and infrastructure development, even a single new road can have extraordinary consequences on traffic patterns and citizen behavior. Regulatory changes and the imposition of new rules are no exception.
In the United States, we’re seeing the introduction of both of these motivators: Regulatory complexity is increasing (a basic function of action and time), and cost-side efficiencies and the introduction of technological solutions are pressuring existing industries. In other words, the timing is ripe for a RegTech revolution.
At Ascent, this drives our work. We’re fixated on data completeness and obsessed with creating efficiencies and safety for our customers. Protecting your business and managing your risk is more important than ever. Investing in RegTech solutions will have extraordinary payouts as time increases, and as you embrace the growing field of RegTech, you can count on Ascent to lead the charge.