The financial industry is growing with an expected percentage of 16.8 viz. $681 billion by the end of 2028. It is no longer a technically backward sector that is slacking off the advancements. From cashless transactions to online loan sanctions, everything is now possible in FinTech.
Whereas, RegTech businesses raised over $18.9 billion in fundraising deals during the course of 2021, which is, double the amount raised in 2020. Both technologies are in demand and running successfully in the financial (especially banking) sector. But how are these two technologies differing from one another?
Let’s understand the meaning of FinTech and RegTech before distinguishing them.
What is FinTech?
Financial Technology, (in short, FinTech) seeks to procreate and automate financial services. From companies to business owners to individuals, use the facilities of algorithms in FinTech. These technologies are used in devices, such as computers, tabs, or phones by consumers to enjoy the real benefits of FinTech.
There are several cutting-edge benefits of FinTech software development. Currently, 40% of US companies use financial accountants to avail the FinTech software solutions
Benefits of FinTech
- Faster approvals on opening bank accounts. With FinTech, you can now easily submit forms and open an account, if need be.
- In reality, technology is the catalyst agent in any industry, and Fintech is one of them. With financial advancement, the efficiency of business operations increases.
- Chatbots, automated assistance, and the custom user interface are a few of the hundreds of automated FinTech advantages.
- FinTech is highly regulated for risk management. It also makes financial operations easier in any sector, than relying on traditional banking services.
- A few people doubt the security of FinTech since it is directly related to finance. But, with advanced security measures, it is safe and efficient enough to use.
Though used in the financial industry, RegTech is however not the same as FinTech.
What is RegTech?
“A subset of fintech that focuses on technologies that may facilitate the delivery of regulatory requirements more efficiently and effectively than existing capabilities,” says the UK’s Financial Conduct Authority. But to make it easier for you, RegTech indicates the technology that ensures the management of all the regulatory processes of the financial industry.
Benefits of RegTech
- With the right RegTech, you can detect market abuse.
- RegTech gives your firm the chance to scale by eliminating the rigid traditional risk management processes.
- It also gives a greater customer experience with the implementation of AI and machine learning.
- Continuous management of third-party vendors to reduce cyber risks.
- Automating performance marketing both in terms of economy and labor.
Both technologies have had a great impact in the 21st century, especially when COVID emerged as the mighty doom, but separately. They are different from one another. Now you have a brief understanding of their definitions, let’s take a look at their differences.
FinTech vs. RegTech
Both the terms ‘FinTech’ and ‘RegTech’ are currently gaining a lot of attention. But how are they different and still so popular?
The Evolution of FinTech and RegTech
The origin of FinTech can be fetched from the early 1990s through financial software development is getting popularity in recent times. Separated in four folds, FinTech 1.0, FinTech 2.0, FinTech 3.0, and FinTech4.0 the rapid growth of financial software development has evolved from ‘too small to care’ to ‘too big to fail’.
Speaking of RegTech 1.0, the period of 1960 to 2008 was quite effective. As it kept booming and made the financial industry more efficient, RegTech 2.0 emerged right after the wave of the global economic crisis.
RegTech growth has been mostly driven by business operators looking to cut costs associated with compliance, but the next phase is expected to be led by regulators looking to strengthen their competence for supervision.
Technologies Supporting FinTech and RegTech
To start with FinTech:
- AI and ML – You can create a thorough user profile and forecast behavior using artificial intelligence and machine learning.
- Blockchain – Solutions using blockchain technology are accessible and safe. So blockchain in FinTech enhances the aspect of reliability.
- Robotic Automation – Financial procedures are automated via RPA.
- Internet of Things – With the help of IoT you can develop POS in software.
Technologies in RegTech:
- Artificial intelligence – Determine which policies apply to your company with the help of AI.
- Blockchain – Major changes in demands can be accessed using blockchain technology.
- Application programming interface – You can create reporting mechanism using APIs.
- Data mining – You can enhance decision-making through data mining.
FinTech and RegTech Innovations for Financial Institutions
The more developers focus on FinTech software development and RegTech development, the financial industry will be to operate the financial processes and regulations. However, things have improved a lot since 2008 and there are several innovations in both technologies for financial institutions.
- E-payment – Biometric identification has emerged as a disruptive change in the financial sector. Now buying things are so easy that it has changed the importance of cash in our lives.
- Cloud infrastructure – If you have a bank account you can operate online, whether computer or your phone. Firms can store clients’ data and operate as need be.
- Gamification – It is booming in the FinTech industry. Some are also merging it with blockchain.
- RPA – One of the greatest RegTech innovations is robotic process automation.
- Data sharing and aggregation – To store all the available data, and refurbish and automate data collection, the real-time database is another core aspect of RegTech.
- Software-as-a-Service – This makes the ultimate category of RegTech. It helps companies to comply with several rules and regulations without much expenditure.
Of course, there are more to come in the future for both technologies.
What Did We Conclude?
RegTech is often said to be a branch of FinTech but in reality, both are not the same. They are two separate technologies doing their bits, staying parallel to one another. Fintech automates financial services and RegTech, unlike FinTech, provides solutions to businesses with financial regulations.
We often get confused between the terms, ‘FinTech’ and ‘RegTech’ because, they are used in conjunction. The thin line of where FinTech ends and RegTech starts is so blurred, they are usually gauged and discussed under the umbrella of innovation in the financial industry.
Now that you know the difference and are ready to dive into the wave of financial innovations, hire FinTech developers and RegTech experts to give your company a new financial platform.