The are a lot of new words created by adding the suffix ‘tech’ to them, including those of FinTech, RegTech and SupTech. These terms represent distinct areas of innovation that address different aspects of finance and regulation. So, what are they and what do they do?
What is Fintech?
Fintech, short for financial technology, encompasses innovative technologies that improve and automate the delivery and use of financial services. Or as the World Bank have stated that Fintech ‘advances in technology that have the potential to transform the provision of financial services, spurring the development of new business models, applications, and process and product.”
Fintech aims to enhance financial processes, making them more efficient and user-friendly. It covers a broad range of applications including mobile banking, peer-to-peer lending, crowdfunding platforms, and cryptocurrency exchanges. FinTech has grown steadily with but The Covid-19 pandemic accelerated the shift towards Fintech adoption.
Key Features of Fintech
User experience
Focuses on improving customer engagement through digital interfaces and personalised services.
Efficiency
Enhances operational efficiencies by automating processes and reducing manual intervention.
Innovation
Introduces new financial products and services, often disrupting traditional financial sectors.
Accessibility
Democratises access to financial services, especially for underserved populations.
What is Regtech?
Regtech, or regulatory technology, is a subsegment of fintech that specifically addresses regulatory challenges in the financial industry through technology. Regtech solutions are designed to help organisations comply with regulations efficiently and effectively. By leveraging modern technologies including machine learning and artificial intelligence, Regtech provides tools for regulatory monitoring, reporting, policy management, regulatory change management and regulatory compliance management.
In a recent report from Deloitte it was noted that “These tools and RegTech in general is yet to see its real value (….). In the short term RegTech will help firms to automate the more mundane compliance tasks and reduce operational risks associated with meeting compliance and reporting obligations. In the longer term it will empower compliance functions to make informed risk choices based on data provided insight about the compliance risks it faces and how it mitigates and manages those risks.”
There are differing views in reports on whether:
- Regtech is a subset, evolving or even the ‘new fintech’
or - Regtech is a separate phenomenon as it applies to more than just the world of finance
- Often seen as one of the less glamorous fintech sectors, regtech’s star is now rising.
This would seem to be dependent on the scope and authoring of specific reports.
Key Features of Regtech
Compliance automation
Automates compliance processes, reducing the burden of manual checks and audits.
Regulatory risk management
Enhances the ability to identify, manage, and mitigate risks related to regulatory compliance.
Data analytics
Utilises advanced analytics to monitor and report regulatory requirements in real-time.
Cost reduction
Lowers the costs associated with compliance by streamlining processes and reducing the need for manual oversight.
What is Suptech?
SupTech, or supervisory technology, is the use of technology by supervisors to deliver innovative and efficient supervisory solutions that will support a more effective, flexible and responsive supervisory system.
SupTech enhanced the capabilities of regulators to oversee and monitor financial institutions.
Suptech tools enable regulators to collect, analyse, and act on data more effectively which improves the overall regulatory framework.
Key Features of Suptech
Data collection
Automates the collection of vast amounts of data from financial institutions.
Analytics and monitoring
Uses advanced analytics to monitor the financial system for signs of instability or non-compliance.
Real-time Supervision
Provides real-time insights into financial activities, enabling prompt regulatory actions.
Efficiency
Enhances the efficiency and accuracy of supervisory processes, reducing the likelihood of financial crises.
Differences Between Fintech, Regtech, and Suptech
While Fintech, Regtech, and Suptech are interrelated, they serve different purposes within the financial ecosystem.
| Technology | Primary Users | Main Purpose |
|---|---|---|
| FinTech | Banks, financial institutions, startups, consumers | Improve financial services and products |
| RegTech | Compliance departments in financial institutions | Enhance regulatory compliance |
| SupTech | Regulatory and supervisory agencies | Strengthen regulatory oversight |
The purpose and technological focus of FinTech, RegTech and SupTech
Fintech
Purpose – Focuses on improving financial services and products for consumers and businesses.
Technological focus – Emphasizes innovation in financial service delivery.
Regtech
Purpose – Concentrates on helping financial institutions comply with regulatory requirements.
Technological focus – Focuses on compliance automation and risk management.
Suptech
Purpose – Aims to enhance the supervisory and monitoring capabilities of financial regulators.
Technological focus – Concentrates on supervisory efficiency and real-time data analytics.
Who uses FinTech, RegTech and SupTech?
Fintech: Banks, financial institutions, startups, and consumers.
Regtech: Compliance departments within financial institutions.
Suptech: Regulatory and supervisory agencies.
Importance of Fintech, Regtech, and Suptech
The integration of these technologies is crucial for the modernisation and stability of the financial system.
Fintech: Drives innovation, enhances user experience, and increases financial inclusion.
Regtech: Ensures compliance, reduces operational risks, and lowers compliance costs.
Suptech: Strengthens regulatory oversight, enhances market integrity, and prevents financial crises.
Fintech, Regtech, and Suptech represent the cutting-edge of technological advancements in the financial sector. These technologies not only improve efficiency and compliance but also play a critical role in ensuring the stability and resilience of the financial system.
By embracing these innovations, financial institutions and regulators can better adapt to the rapidly changing business, financial and economic environment, ensuring robust, compliant, and efficient financial services.