In this article David Clee, the CEO and co-founder of the regulatory technology firm of MirrorWeb, takes time out of a busy schedule to answer a few questions about the future of RegTech.

Q: Might we please have a goodly number of your observations about RegTech take-up among wealth management firms (i.e. at private banks, DFMs, advisor networks, paraplanners, MFOs, trusts etc)?

A: With the regulatory landscape constantly evolving and regulators now enforcing new standards more actively, the pressure on wealth managers to comply is growing rapidly. Indeed, in the UK, fines are on the rise, soaring by around 550% in 2019.

As a result of the cost and time burden on compliance teams increasing, wealth management companies are increasingly looking to RegTech for support. Indeed, the improvements in efficiency and accuracy that RegTech offers are not just increasingly desirable, but also likely to be highly necessary for wealth managers in the coming years, as their compliance burden continues to grow.

Q: The new technology that FinTech offers (artificial intelligence/AI, blockchains, 'voice' and mobile technology) is, by and large, the same that RegTech uses - true?

A: There is a lot of cross-over, but there is a marked difference between the two.

RegTech, as the name implies, is much more about helping financial services firms surmount regulatory problems directly. MirrorWeb, for example, allows firms to capture immutable records of their websites and online channels, allowing them to keep track of any potential regulatory problems and store evidence of what was published and when.

Whereas FinTech may take the regulation that sits above it and its customers into consideration, FinTech companies were never built explicitly to solve compliance problems. Rather than helping existing financial institutions improve their offerings, FinTech broadly aims to improve the delivery of financial products and services to consumers by disrupting the industry – just look at challenger banks like Monzo and Revolut.

Q: Is the UK falling behind any other jurisdiction(s) in RegTech?

A: No. By 2023, the RegTech market is expected to be worth US$12.3 billion – nearly a threefold increase on the value of the industry at the end of last year. The UK is among some of the most promising jurisdictions.

In fact, research by Cambridge’s Judge Business School puts the UK as the top RegTech market internationally when one measures the number of firms active or headquartered in a given jurisdiction. This has undoubtedly been fuelled in part by the success of UK-based 'sandboxes,' with the FCA regulatory sandbox’s first cohort alone securing £135 million in equity funding and 80% still in operation. This clearly exposes the strength of the sector in the UK.

Q: What do you think of American RegTech?

A: The American RegTech market holds incredible potential and the forecasts suggest that by 2025, it will be worth over $55 billion. After all, as the world’s biggest economy, boasting a highly influential financial services industry, the US is a favourable climate in which RegTech can flourish.

This was exactly why we are thrilled to have recently been listed on FINRA's Compliance Vendor Directory (CVD).

Q: What jobs are you currently seeing done manually that RegTech ought to be doing?

A: The potential for RegTech to unburden compliance teams and reduce their dependence on manual tasks is obviously considerable and we have seen that at first hand in supporting web archiving requirements for our clients. But I would add that automation of these processes should not come at the expense of proactive, reliable and ongoing monitoring and interaction by your service providers.

To illustrate this from MirrorWeb’s point of view, financial-service-providing entities are obliged to comply with regulations to do with financial promotions and archiving. These require them to collect, timestamp and store all data about digital communications. If compliance teams were to undertake such a task manually, the pressure on time and resources would be significant and accuracy levels would also drop below those offered by supporting software. Alongside the technological capabilities to automate this process, we ensure that the software is supported by a quality assurance team rather than taking a "set it and forget it" approach.

Q: Is it hard for an innovative bank executive to convince his main board to take on a piece of RegTech?

A: Any regulated business would be unwise to dismiss the potential of RegTech and this is certainly becoming clear at the highest levels of the banking industry. It’s why over 60% of financial institutions expect to spend more on finding and implementing new RegTech solutions over the course of the coming year.

Fuelling this, in part, is the constant evolution of the regulatory landscape and, in turn, the regulatory challenges with which banks and other institutions must grapple. In addition, and as referenced above, the increasing assertiveness with which regulators are enforcing these regulations means that banks need efficient solutions to meet these challenges. RegTech clearly has the potential to meet this demand.