The use of technology to create process efficiencies and enhanced user experiences has been fully entrenched in the financial services sector for some time. In recent years, the pace of change has quickened with the introduction of a kaleidoscope of new technologies such as data analytics, cloud computing, blockchain, machine learning and biometrics that can be applied to solve friction points within the financial services sector while meeting the needs of an ever-demanding digital savvy consumer.
Derivatives of Fintech have emerged to define specialized areas of technology innovation. One such branch is Regtech which applies technologies to solve regulatory and compliance requirements more effectively and efficiently. It is meant to permit better compliance solutions and lower the cost of ownership to comply to new regulation. Supporters of Regtech view it as an enabler not a threat to the industry; however, the complexities of implementing a successful Regtech solution should not be under estimated. Although technology is enabling better Regtech solutions, there are several market structure impediments that may prevent solutions from reaching their full potential.
The digital wave is hitting the financial service industry at an extraordinary rate creating opportunities but also challenges for the financial services ecosystem. Consumers have higher expectations and want better access, transparency and delivery options. New technologies such as blockchain are unravelling traditional workflows and have the potential to represent the next evolutionary jump in process optimization. Digital currencies and asset value exchanges are disrupting how value and assets change hands. Each of these innovations are upsetting the current market structure and regulatory framework and create their own set of unique challenges in terms of governance, risk management and standards.
To use a common phrase – ‘change is good.’ So despite the pace of change, governments and regulators around the world recognize the positive benefits innovation provides in promoting competition, attracting top talent and generating revenue for the economy. However, there is also widespread recognition that current consumer and investor protection measures cannot be compromised and that any supportive framework should be balanced.