Demand for regtech services ballooned in 2021 and there is still a lot of room for the industry to grow further. Services of the industry have become mainstream with increasing regulatory requirements for financial service providers.
“You can look at 2021 as the year that Regtech became mainstream and virtually every large financial firm had contracted or was in deep discussions with regtech firms with their services,” Ron Finberg, Director of Global Regulatory Reporting Solutions at IHS Markit, told Finance Magnates.
The demand was also driven by the benefits of regtechs like deployment speed, cost savings and streamlining of all
compliance
Compliance
In finance, banking, investing, and insurance compliance refers to following the rules or orders set down by the government regulatory authority, either as providing a service or processing a transaction. Compliance concerning finance would also be a state of being following established guidelines or specifications. This designation can also encompass efforts to ensure that organizations are abiding by both industry regulations and government legislation. Understanding ComplianceCompliance is a system of checks and balances that prevents fraud and inefficiencies.Additionally, this also ensures cooperation with federal financial regulations with the ultimate goal of protecting the public and provide needed information to governmental agencies to stop fraud, money laundering, and terrorist funding. Compliance in the financial industry offers stability to the markets and serves to protect customers, workers, and taxpayers from ethical threats that are inherited in individual decisions.Many organizations are also obligated to track and store compliance data. This includes all data that is relevant or belongs to a company, brokerage, etc. that can be used for the purpose of implementing or validating compliance or regulatory reporting.Given shifting regulations and the importance of compliance, the use of advanced software is increasingly being implemented to help companies manage their compliance data more efficiently. This cache includes calculations, data transfers, and audit trails.While finance is a globally unified concept, compliance is not. Regulatory compliance varies across both industries and jurisdictions. For example, the financial regulatory structures of one country may be lacking or different in another. Of note, the most tightly regulated jurisdictions in terms of compliance in the forex industry include the United States, United Kingdom or most European Union countries, Australia, New Zealand, Canada, and others.
In finance, banking, investing, and insurance compliance refers to following the rules or orders set down by the government regulatory authority, either as providing a service or processing a transaction. Compliance concerning finance would also be a state of being following established guidelines or specifications. This designation can also encompass efforts to ensure that organizations are abiding by both industry regulations and government legislation. Understanding ComplianceCompliance is a system of checks and balances that prevents fraud and inefficiencies.Additionally, this also ensures cooperation with federal financial regulations with the ultimate goal of protecting the public and provide needed information to governmental agencies to stop fraud, money laundering, and terrorist funding. Compliance in the financial industry offers stability to the markets and serves to protect customers, workers, and taxpayers from ethical threats that are inherited in individual decisions.Many organizations are also obligated to track and store compliance data. This includes all data that is relevant or belongs to a company, brokerage, etc. that can be used for the purpose of implementing or validating compliance or regulatory reporting.Given shifting regulations and the importance of compliance, the use of advanced software is increasingly being implemented to help companies manage their compliance data more efficiently. This cache includes calculations, data transfers, and audit trails.While finance is a globally unified concept, compliance is not. Regulatory compliance varies across both industries and jurisdictions. For example, the financial regulatory structures of one country may be lacking or different in another. Of note, the most tightly regulated jurisdictions in terms of compliance in the forex industry include the United States, United Kingdom or most European Union countries, Australia, New Zealand, Canada, and others.
Read this Term needs. Also, the industry competition for the implementation of the best technologies boosted this demand further. Impacts of Covid-19, the introduction of EMIR Refit, Brexit, implementation of leverage restrictions in the Australian CFD market, the final phase of MAS reporting, all have contributed to the boom of regtech services.
Additionally, the regulatory demand around
cryptocurrencies
Cryptocurrencies
By using cryptography, virtual currencies, known as cryptocurrencies, are nearly counterfeit-proof digital currencies that are built on blockchain technology. Comprised of decentralized networks, blockchain technology is not overseen by a central authority.Therefore, cryptocurrencies function in a decentralized nature which theoretically makes them immune to government interference. The term, cryptocurrency derives from the origin of the encryption techniques that are employed to secure the networks which are used to authenticate blockchain technology. Cryptocurrencies can be thought of as systems that accept online payments which are denoted as “tokens.” Tokens are represented as internal ledger entries in blockchain technology while the term crypto is used to depict cryptographic methods and encryption algorithms such as public-private key pairs, various hashing functions, and an elliptical curve. Every cryptocurrency transaction that occurs is logged in a web-based ledger with blockchain technology.These then must be approved by a disparate network of individual nodes (computers that maintain a copy of the ledger). For every new block generated, the block must first be authenticated and confirmed ‘approved’ by each node, which makes forging the transactional history of cryptocurrencies nearly impossible. The World’s First CryptoBitcoin became the first blockchain-based cryptocurrency and to this day is still the most demanded cryptocurrency and the most valued. Bitcoin still contributes the majority of the overall cryptocurrency market volume, though several other cryptos have grown in popularity in recent years.Indeed, out of the wake of Bitcoin, iterations of Bitcoin became prevalent which resulted in a multitude of newly created or cloned cryptocurrencies. Contending cryptocurrencies that emerged after Bitcoin’s success is referred to as ‘altcoins’ and they refer to cryptocurrencies such as Bitcoin, Peercoin, Namecoin, Ethereum, Ripple, Stellar, and Dash. Cryptocurrencies promise a wide range of technological innovations that have yet to be structured into being. Simplified payments between two parties without the need for a middle man is one aspect while leveraging blockchain technology to minimize transaction and processing fees for banks is another. Of course, cryptocurrencies have their disadvantages too. This includes issues of tax evasion, money laundering, and other illicit online activities where anonymity is a dire ingredient in solicitous and fraudulent activities.
By using cryptography, virtual currencies, known as cryptocurrencies, are nearly counterfeit-proof digital currencies that are built on blockchain technology. Comprised of decentralized networks, blockchain technology is not overseen by a central authority.Therefore, cryptocurrencies function in a decentralized nature which theoretically makes them immune to government interference. The term, cryptocurrency derives from the origin of the encryption techniques that are employed to secure the networks which are used to authenticate blockchain technology. Cryptocurrencies can be thought of as systems that accept online payments which are denoted as “tokens.” Tokens are represented as internal ledger entries in blockchain technology while the term crypto is used to depict cryptographic methods and encryption algorithms such as public-private key pairs, various hashing functions, and an elliptical curve. Every cryptocurrency transaction that occurs is logged in a web-based ledger with blockchain technology.These then must be approved by a disparate network of individual nodes (computers that maintain a copy of the ledger). For every new block generated, the block must first be authenticated and confirmed ‘approved’ by each node, which makes forging the transactional history of cryptocurrencies nearly impossible. The World’s First CryptoBitcoin became the first blockchain-based cryptocurrency and to this day is still the most demanded cryptocurrency and the most valued. Bitcoin still contributes the majority of the overall cryptocurrency market volume, though several other cryptos have grown in popularity in recent years.Indeed, out of the wake of Bitcoin, iterations of Bitcoin became prevalent which resulted in a multitude of newly created or cloned cryptocurrencies. Contending cryptocurrencies that emerged after Bitcoin’s success is referred to as ‘altcoins’ and they refer to cryptocurrencies such as Bitcoin, Peercoin, Namecoin, Ethereum, Ripple, Stellar, and Dash. Cryptocurrencies promise a wide range of technological innovations that have yet to be structured into being. Simplified payments between two parties without the need for a middle man is one aspect while leveraging blockchain technology to minimize transaction and processing fees for banks is another. Of course, cryptocurrencies have their disadvantages too. This includes issues of tax evasion, money laundering, and other illicit online activities where anonymity is a dire ingredient in solicitous and fraudulent activities.
Read this Term and the addition of digital currency products might also shoot up the regtech demand.
“This presents an opportunity for regtech firms in 2022 as clients are trusting them to outsource more or their technology build to them,” Finberg added.
Executives across the industry also believe in the same line and are optimistic about the growth of reghtech services in 2022.
But, There Are Also Challenges
The regtech companies have to mold their products according to the changing regulatory scenarios. Also, there are risks as regtech firms need to continue to build trust with clients that they can adapt and grow with their customer’s needs to roll out new features and services while maintaining performance.
Sophie Gerber, a Director at Sophie Grace and TRAction Fintech, explained: “There will still be a lot of work in the implementation of regulatory tweaks which are scheduled or in the pipeline in most major jurisdictions. Thankfully there are no major new pieces of regulation that need to have products developed as well.”
2022 Trends
Despite the risks and challenges, regtech remains among the fastest-growing industries. It generated $5.32 billion in revenue in 2019 and is expected to bring in $21.73 billion by 2027, thus growing at a rate of 19.5 percent.
So, what will be the primary trend in the regtech space this year?
Remonda Kirketerp-Møller, founder and CEO of Muinmos, believes that the biggest trend for 2022 will be RegTech-regulators cooperation. “We’re seeing this with regulators approaching us, wanting to know more about the capabilities of our products; and with regulators approaching us and offering us the opportunity to participate in test labs and sandboxes; and we even see regulators holding joint working groups with RegTech companies in order to better cope with upcoming challenges and market changes,” she said.
“I believe this is a very positive development.”
But, that’s not everything as many other areas within regtech can make a big impact this year.
“Next year’s big trend will involve accuracy, more specifically what’s required to show your workings in the reconciliation world and retain oversight on a fully transparent workflow,” said Mark Ellis, UK Business Development Manager at MAP Fintech.
“I think this will affect trade level reporting for the former and trade surveillance for the latter. This will bring about the implementation of systems that can adapt to future regulatory changes, be this EMIR’s refit or the natural divergence between the EU and the UK.”
Gerber added: “In trade and transaction reporting, We can expect to see widespread adoption of ISO 20022, XML schemas and the shift toward a legal entity identifier (LEI) only policy within the OTC derivatives market across jurisdictions globally. This adoption will provide regulators with richer and more consistent data enabling improved global data aggregation.”
Regulatory Priority
The past few years remained very busy in terms of regulations with many macro-economic events and changing regulatory landscape. Compared to that, 2022 is expected to be quieter as financial regulators shift their focus on much-needed stability and simplicity.
“I expect financial regulators to try to tighten up their controls, as well as keep the ‘end points’ as harmonized as possible,” Ellis said. “It has been an industry concern that regulators are receiving fragmented data from multiple TRs, certainly where matching is concerned, and they will look to tighten up, a move that will directly impact the reporting firms themselves.”
Finberg also believes that improving data quality will be a regulatory priority this year. “Regulators are keeping their eye on the adoption of new CDE standards and writing their new regulation using subsets of these data fields that best collect the information to do their jobs of monitoring the market,” he said.
But, the most-watched space will be regulatory frameworks around booming cryptocurrencies.
“The regulation of crypto seems to be the hottest topic in financial regulation right now, and it seems like that’s not going to change in 2022,” Muinmos CEO said.
“The only thing that might stop the regulation-train, and that’s a big ‘might’, is if Crypto exchanges will self-regulate in such a way that will put the minds of regulators at ease. We’ve seen some signs of that across various parts of the world, but not currently to an extent that will prevent regulatory intervention.”
Demand for regtech services ballooned in 2021 and there is still a lot of room for the industry to grow further. Services of the industry have become mainstream with increasing regulatory requirements for financial service providers.
“You can look at 2021 as the year that Regtech became mainstream and virtually every large financial firm had contracted or was in deep discussions with regtech firms with their services,” Ron Finberg, Director of Global Regulatory Reporting Solutions at IHS Markit, told Finance Magnates.
The demand was also driven by the benefits of regtechs like deployment speed, cost savings and streamlining of all
compliance
Compliance
In finance, banking, investing, and insurance compliance refers to following the rules or orders set down by the government regulatory authority, either as providing a service or processing a transaction. Compliance concerning finance would also be a state of being following established guidelines or specifications. This designation can also encompass efforts to ensure that organizations are abiding by both industry regulations and government legislation. Understanding ComplianceCompliance is a system of checks and balances that prevents fraud and inefficiencies.Additionally, this also ensures cooperation with federal financial regulations with the ultimate goal of protecting the public and provide needed information to governmental agencies to stop fraud, money laundering, and terrorist funding. Compliance in the financial industry offers stability to the markets and serves to protect customers, workers, and taxpayers from ethical threats that are inherited in individual decisions.Many organizations are also obligated to track and store compliance data. This includes all data that is relevant or belongs to a company, brokerage, etc. that can be used for the purpose of implementing or validating compliance or regulatory reporting.Given shifting regulations and the importance of compliance, the use of advanced software is increasingly being implemented to help companies manage their compliance data more efficiently. This cache includes calculations, data transfers, and audit trails.While finance is a globally unified concept, compliance is not. Regulatory compliance varies across both industries and jurisdictions. For example, the financial regulatory structures of one country may be lacking or different in another. Of note, the most tightly regulated jurisdictions in terms of compliance in the forex industry include the United States, United Kingdom or most European Union countries, Australia, New Zealand, Canada, and others.
In finance, banking, investing, and insurance compliance refers to following the rules or orders set down by the government regulatory authority, either as providing a service or processing a transaction. Compliance concerning finance would also be a state of being following established guidelines or specifications. This designation can also encompass efforts to ensure that organizations are abiding by both industry regulations and government legislation. Understanding ComplianceCompliance is a system of checks and balances that prevents fraud and inefficiencies.Additionally, this also ensures cooperation with federal financial regulations with the ultimate goal of protecting the public and provide needed information to governmental agencies to stop fraud, money laundering, and terrorist funding. Compliance in the financial industry offers stability to the markets and serves to protect customers, workers, and taxpayers from ethical threats that are inherited in individual decisions.Many organizations are also obligated to track and store compliance data. This includes all data that is relevant or belongs to a company, brokerage, etc. that can be used for the purpose of implementing or validating compliance or regulatory reporting.Given shifting regulations and the importance of compliance, the use of advanced software is increasingly being implemented to help companies manage their compliance data more efficiently. This cache includes calculations, data transfers, and audit trails.While finance is a globally unified concept, compliance is not. Regulatory compliance varies across both industries and jurisdictions. For example, the financial regulatory structures of one country may be lacking or different in another. Of note, the most tightly regulated jurisdictions in terms of compliance in the forex industry include the United States, United Kingdom or most European Union countries, Australia, New Zealand, Canada, and others.
Read this Term needs. Also, the industry competition for the implementation of the best technologies boosted this demand further. Impacts of Covid-19, the introduction of EMIR Refit, Brexit, implementation of leverage restrictions in the Australian CFD market, the final phase of MAS reporting, all have contributed to the boom of regtech services.
Additionally, the regulatory demand around
cryptocurrencies
Cryptocurrencies
By using cryptography, virtual currencies, known as cryptocurrencies, are nearly counterfeit-proof digital currencies that are built on blockchain technology. Comprised of decentralized networks, blockchain technology is not overseen by a central authority.Therefore, cryptocurrencies function in a decentralized nature which theoretically makes them immune to government interference. The term, cryptocurrency derives from the origin of the encryption techniques that are employed to secure the networks which are used to authenticate blockchain technology. Cryptocurrencies can be thought of as systems that accept online payments which are denoted as “tokens.” Tokens are represented as internal ledger entries in blockchain technology while the term crypto is used to depict cryptographic methods and encryption algorithms such as public-private key pairs, various hashing functions, and an elliptical curve. Every cryptocurrency transaction that occurs is logged in a web-based ledger with blockchain technology.These then must be approved by a disparate network of individual nodes (computers that maintain a copy of the ledger). For every new block generated, the block must first be authenticated and confirmed ‘approved’ by each node, which makes forging the transactional history of cryptocurrencies nearly impossible. The World’s First CryptoBitcoin became the first blockchain-based cryptocurrency and to this day is still the most demanded cryptocurrency and the most valued. Bitcoin still contributes the majority of the overall cryptocurrency market volume, though several other cryptos have grown in popularity in recent years.Indeed, out of the wake of Bitcoin, iterations of Bitcoin became prevalent which resulted in a multitude of newly created or cloned cryptocurrencies. Contending cryptocurrencies that emerged after Bitcoin’s success is referred to as ‘altcoins’ and they refer to cryptocurrencies such as Bitcoin, Peercoin, Namecoin, Ethereum, Ripple, Stellar, and Dash. Cryptocurrencies promise a wide range of technological innovations that have yet to be structured into being. Simplified payments between two parties without the need for a middle man is one aspect while leveraging blockchain technology to minimize transaction and processing fees for banks is another. Of course, cryptocurrencies have their disadvantages too. This includes issues of tax evasion, money laundering, and other illicit online activities where anonymity is a dire ingredient in solicitous and fraudulent activities.
By using cryptography, virtual currencies, known as cryptocurrencies, are nearly counterfeit-proof digital currencies that are built on blockchain technology. Comprised of decentralized networks, blockchain technology is not overseen by a central authority.Therefore, cryptocurrencies function in a decentralized nature which theoretically makes them immune to government interference. The term, cryptocurrency derives from the origin of the encryption techniques that are employed to secure the networks which are used to authenticate blockchain technology. Cryptocurrencies can be thought of as systems that accept online payments which are denoted as “tokens.” Tokens are represented as internal ledger entries in blockchain technology while the term crypto is used to depict cryptographic methods and encryption algorithms such as public-private key pairs, various hashing functions, and an elliptical curve. Every cryptocurrency transaction that occurs is logged in a web-based ledger with blockchain technology.These then must be approved by a disparate network of individual nodes (computers that maintain a copy of the ledger). For every new block generated, the block must first be authenticated and confirmed ‘approved’ by each node, which makes forging the transactional history of cryptocurrencies nearly impossible. The World’s First CryptoBitcoin became the first blockchain-based cryptocurrency and to this day is still the most demanded cryptocurrency and the most valued. Bitcoin still contributes the majority of the overall cryptocurrency market volume, though several other cryptos have grown in popularity in recent years.Indeed, out of the wake of Bitcoin, iterations of Bitcoin became prevalent which resulted in a multitude of newly created or cloned cryptocurrencies. Contending cryptocurrencies that emerged after Bitcoin’s success is referred to as ‘altcoins’ and they refer to cryptocurrencies such as Bitcoin, Peercoin, Namecoin, Ethereum, Ripple, Stellar, and Dash. Cryptocurrencies promise a wide range of technological innovations that have yet to be structured into being. Simplified payments between two parties without the need for a middle man is one aspect while leveraging blockchain technology to minimize transaction and processing fees for banks is another. Of course, cryptocurrencies have their disadvantages too. This includes issues of tax evasion, money laundering, and other illicit online activities where anonymity is a dire ingredient in solicitous and fraudulent activities.
Read this Term and the addition of digital currency products might also shoot up the regtech demand.
“This presents an opportunity for regtech firms in 2022 as clients are trusting them to outsource more or their technology build to them,” Finberg added.
Executives across the industry also believe in the same line and are optimistic about the growth of reghtech services in 2022.
But, There Are Also Challenges
The regtech companies have to mold their products according to the changing regulatory scenarios. Also, there are risks as regtech firms need to continue to build trust with clients that they can adapt and grow with their customer’s needs to roll out new features and services while maintaining performance.
Sophie Gerber, a Director at Sophie Grace and TRAction Fintech, explained: “There will still be a lot of work in the implementation of regulatory tweaks which are scheduled or in the pipeline in most major jurisdictions. Thankfully there are no major new pieces of regulation that need to have products developed as well.”
2022 Trends
Despite the risks and challenges, regtech remains among the fastest-growing industries. It generated $5.32 billion in revenue in 2019 and is expected to bring in $21.73 billion by 2027, thus growing at a rate of 19.5 percent.
So, what will be the primary trend in the regtech space this year?
Remonda Kirketerp-Møller, founder and CEO of Muinmos, believes that the biggest trend for 2022 will be RegTech-regulators cooperation. “We’re seeing this with regulators approaching us, wanting to know more about the capabilities of our products; and with regulators approaching us and offering us the opportunity to participate in test labs and sandboxes; and we even see regulators holding joint working groups with RegTech companies in order to better cope with upcoming challenges and market changes,” she said.
“I believe this is a very positive development.”
But, that’s not everything as many other areas within regtech can make a big impact this year.
“Next year’s big trend will involve accuracy, more specifically what’s required to show your workings in the reconciliation world and retain oversight on a fully transparent workflow,” said Mark Ellis, UK Business Development Manager at MAP Fintech.
“I think this will affect trade level reporting for the former and trade surveillance for the latter. This will bring about the implementation of systems that can adapt to future regulatory changes, be this EMIR’s refit or the natural divergence between the EU and the UK.”
Gerber added: “In trade and transaction reporting, We can expect to see widespread adoption of ISO 20022, XML schemas and the shift toward a legal entity identifier (LEI) only policy within the OTC derivatives market across jurisdictions globally. This adoption will provide regulators with richer and more consistent data enabling improved global data aggregation.”
Regulatory Priority
The past few years remained very busy in terms of regulations with many macro-economic events and changing regulatory landscape. Compared to that, 2022 is expected to be quieter as financial regulators shift their focus on much-needed stability and simplicity.
“I expect financial regulators to try to tighten up their controls, as well as keep the ‘end points’ as harmonized as possible,” Ellis said. “It has been an industry concern that regulators are receiving fragmented data from multiple TRs, certainly where matching is concerned, and they will look to tighten up, a move that will directly impact the reporting firms themselves.”
Finberg also believes that improving data quality will be a regulatory priority this year. “Regulators are keeping their eye on the adoption of new CDE standards and writing their new regulation using subsets of these data fields that best collect the information to do their jobs of monitoring the market,” he said.
But, the most-watched space will be regulatory frameworks around booming cryptocurrencies.
“The regulation of crypto seems to be the hottest topic in financial regulation right now, and it seems like that’s not going to change in 2022,” Muinmos CEO said.
“The only thing that might stop the regulation-train, and that’s a big ‘might’, is if Crypto exchanges will self-regulate in such a way that will put the minds of regulators at ease. We’ve seen some signs of that across various parts of the world, but not currently to an extent that will prevent regulatory intervention.”
Source: https://www.financemagnates.com/fintech/is-2022-going-to-be-the-year-of-the-regtech/