Bureaucratic involvement is always apparent whenever it begins to affect a new industry. At this time, there will be the sudden need for a Chief Compliance Officer, who will suggest that he bring in his own set of lieutenants to ensure that the new proposed policies are enforced and observed by the masses. While the overall effectiveness of the implementation of additional rules is often a debatable practice, one fact that remains is the reality that these practices will most definitely bring about more costs for a company, while also causing the stock of that company to take a hit. A viable solution to this is for the company to embrace regulatory technology, or “RegTech.”
Regtech utilizes blockchain technology and artificial intelligence, as well as additional forms of advanced tech, in order to diminish regulatory costs. As recently as last year, Bain and Co. spoke about 80 developing companies that have been labeled “emerging RegTechs,” who have been steadily infiltrating major industries, such as insurance and banking, thus bringing about substantial boosts to overall profits. The majority of these RegTech companies are upstarts, and mostly unfamiliar to the masses. They include names such as ComplyAdvantage, OnRule, Flexeye, and Taxometry. While there are only a few publicly traded RegTechs in the current market, there is enormous potential for growth in the upcoming years. According to recent studies cited by Let’s Talk Payments, banks are currently spending upwards of $70 billion globally, in order to ensure universal compliance within all of their business jurisdictions. This massive figure is expected to rise to upwards of $120 billion in the next few years as RegTech services and products begin to gain prominence. According to American Banker, the costs needed to maintain compliance through the current legacy systems can take several years, costing the major banks around $10 million, while utilizing a RegTech specialist can cut the time and cost to around three months, at $300,000.
Jeff Yastine is the editor of Total Wealth Insider, joining Banyan Hill Publishing in 2015. He has over two decades of experience as a financial journalist and stock market investor and is a regular contributor to Winning Investor Daily, as well as Sovereign Investor Daily. During his time as an anchor and correspondent for PBS Nightly Business Report, which he held from 1994 to 2010, he was nominated for an Emmy, while also becoming privy to the secret investment practices of some of the era’s most successful entrepreneurs and financiers, such as Warren Buffett and Richard Branson.