Podcast April 12, 2022

The Wealth Ecosystem and The Role of Regtech

Regulation tech has grown up alongside the boom in Fintech. But where’s it headed in the near term future?

Hear our conversation with Ben Parker, Director, and Founder at eflow Global:

  • Regulation changes and potential financial crime
  • The boom in Fintech and the growth of regulation tech
  • How the explosion in wealth tech will affect regulation

Regulation changes and potential financial crime

There are plenty of things that Ben and his team have come across in the last 20 years of building and deploying cloud-based solutions for financial markets.

Banks, brokers, asset managers, and neobanks — there’s no niche left unserved by eflow.

In that time, Ben has observed the solution’s active prevention of financial fraud (money laundering, for example, or manipulation of the money market).

As it archives, analyzes or reports on vast amounts of big data, eflow’s system also takes care of regulatory reporting and information sharing tasks on behalf of customers.

It’s an enormous pain and often involves anxiety and overwhelming amounts of self-doubt just before hitting submit or beginning an audit. The frustration that companies experience at the domino effect from even one minor legislative change can be enough to send people spiraling into nervous breakdowns.

It’s no wonder the environment was ripe for a solution that prevented regulatory headaches before even needing to treat them.

Regtech has had to grow up as there’s been this boom in Fintech.” — Ben Parker

The boom in Fintech and growth of regulation tech

Regulation tech, or Regtech as it is becoming known, emerged out of the Fintech industry to address a critical need shared by traditional and new-age financial institutions.

Ben has observed that the separation of regulators, providing them with truly independent identities, has created space to focus on regulation as a priority. This has been vital for institutions finding their feet again after the recession of 2008.

Regtech has even diversified and there are niches within this niche, to support the marketplace with adhering to regulations around specific functions like payments, transfer of funds, credit product access and more. Naturally, the investment capital available for Regtech has also increased.

“We’ve seen significant moves to regulation. Whether it be payments or all sorts of different regulations, it’s been driven mostly by those regulators.” — Ben Parker

The inescapable link between the two

Regulations are a part of operating in the financial services, wealth creation and wealth management, and Fintech industries.

If you’re going to offer turnkey solutions and products throughout those industries, it’s going to require the same application for the regulatory aspects.

If we learned anything from 2008, it’s that the regulators will catch up eventually so it’s worth thinking about it before disaster strikes.

How the explosion in wealth tech will affect regulation

Considering the progress that regulators have made overall since the financial crash, it’s admirable how today’s Fintech market approaches solution development, specifically Ben’s team as a part of the Regtech niche.

Firefighting vs innovation

On the one hand, you have the need to address breaches and incidents that have already happened: you need lightning-fast response times and effective tools for isolating and patching issues and risks.

On the other hand, you need to be thinking about preventative measures because even criminals evolve their methodology to meet the tech world where it is. Most people fall prey to fraud because they’re either caught up in the ‘ooh’ and ‘aah’ of their shiny new digital toys or they’re naive and complacent about security overall.

Regtech is a way to introduce preventative measures because sometimes there is no cure at all.

Where do Regtech companies focus?

It might surprise you, but the answer to this question is that they focus everywhere.

Regulations touch every part of these industries:

  • Communications
  • Transactions
  • Data analytics
  • Advertising
  • Reporting
  • Investor relations

All the while, analyzing these areas of businesses, the goal is to make predictions, educated guesses, around where the industries and their respective markets are heading.

“One of the biggest challenges is data. It’s not just the volume of it but the breadth across the market.” — Ben Parker

Wealth tech, in particular, has a lot to gain from Regtech development. Borderless transactions and offshore banking are more accessible for people around the world. There’s no doubt that Regtech will become a necessity rather than remaining a luxury, to manage those complex multidirectional and multilevel agreements.

One thing’s for sure: Regtech enables trade at scale via new-age platforms, including cryptocurrencies.

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Until next time!




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