The REGTECH Book

RegTech: Tackling Regulation with Innovation

By Jan-Maarten Mulder

Founder, Summer Capital

Certainly, RegTech is nothing new; incumbents and technology companies have invested in regulatory solutions for many years. However, RegTech as an interesting investment theme has emerged only in the last year and is now rapidly becoming mainstream. As opposed to FinTech, which is generally seen as early-stage companies looking to disrupt financial services companies, most RegTech companies solve problems faced by incumbents, which results in much greater willingness to engage in conversations and partnerships.

Removing the Bottlenecks to Innovation

It is hoped that RegTech entering the mainstream will speed up the delivery of solutions, which today are hampered for two key reasons. First, there is a limited amount of venture investment in the space. If you exclude investments made by incumbents and established technology providers (and focus only on RegTech within financial services), less than US$200 million per annum has been invested in early-stage RegTech start-ups. Second, the long sales cycle of selling a product to a financial services firm can be an inhibitor for start-ups. Probably as an unintended result of regulation, financial firms have become very conservative in working with new(er) external vendors. Here is where firms and regulators have a responsibility to catalyse innovation by collaborating with interesting solution providers at an early stage (and not subject ...