RegTech: Why does it matter?

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July 2021

RegTech seems to be on everyone’s lips these days, but can it really help financial services? The regulators seem to think so. 

UK’s view of RegTech

There has been a steady increase in regulatory focus on technology and innovation. We see the regulators worldwide looking towards technology to help the financial sector and encouraging firms to share their learnings in an attempt to bring down costs, but also testing ideas in a safe environment.

In the UK, the FCA launched its sandbox in 2016 with the aim of allowing firms to test new products and services in a safe environment. In its first year of operation, the sandbox supported 50 firms and FCA issued its lessons learned the following year. 

The FCA continues its work in this area and in June 2021, FCA’s Insight, shared its findings relating to the use of RegTech. Due to the pandemic and increased remote working practices, the RegTech sector has continued to grow. The article indicates that: 

“RegTechs having raised $8.3bn across 348 deals in 2020, beating the previous high of $7.2bn set in 2019, demonstrating that the industry is still able to raise funds and expand.”

The same report states that firms are happy with the technology, but firms are looking for more from the RegTech providers. 

“It turns out that customers are very satisfied with what RegTech can provide. But there is also demand for better communications from the industry, better technology integration and for standards and certification. They also believe regulators have a vital role to play in the future of RegTech.”

2020 saw the FCA collaborate with The City of London Corporation to pilot a ‘digital sandbox’. The pilot provided enhanced support to innovative firms tackling challenges caused by the coronavirus pandemic and a second phase focusing on sustainable finance is to be launched later in 2021. Benefits so far included: 

  • accelerated development times
  • improved product design and
  • enabled early-stage refining of business models 

This focus on technology was supported in The Chancellor’s Mansion House speech which pointed to encouraging technology. The Chancellor voiced the desire to be:

“more open, more competitive, more technologically advanced, and more sustainable – that is our vision for financial services.”

There was an indication of a ‘sweeping set of reforms’ to ensure that the UK’s FS sector remains a world leader with the emphasis upon:

  1. Sharpening our competitive advantage
  2. Continuing to deliver to communities and citizens
  3. Working internationally to set higher global standards 

The Chancellor also referred to key relationships with the USA and China as well as strengthening standards to ensure that the UK’s FS sector continues to have access to the EU. 

Regional Attitudes to RegTech 

There are number of regional initiatives in progress around the world. For example, the European Banking Authority (EBA) in the EU and the Hong Kong Monetary Authority (HKMA) in Asia have completed a number of projects and continue with their efforts in this field. 

European Banking Authority

EBA proposes the following steps to be taken to support sound adoption and scale-up of RegTech solutions: 

  • activities to deepen knowledge and address any skill gaps among regulators and supervisors on RegTech; support convergence of supervisory practices across the EU in the treatment of RegTech; and provide clarity on supervisory expectations;
  • further steps to harmonise the legal and regulatory requirements;
  • leverage the role and expertise of the European Forum for Innovation Facilitators (EFIF) and the national regulatory sandboxes and innovation hubs as a safe testing environment for RegTech solutions. 

In Q4 2021, the EBA will organise a public online webinar to present and discuss the main findings of the RegTech market analysis in the EU. 

Hong Kong Monetary Authority

The HKMA is keen to promote Hong Kong as a RegTech Hub. At its recent event “Unlocking the Power of RegTech”, the HKMA repeated its desire to compete on the global stage. In November 2020, the HKMA set out its two-year road map to promote the adoption of RegTech. To support this initiative it has taken various steps: 

  • Published various guidelines and the RegTech Index
  • Knowledge Hub
  • Encouraged competition and
  • Set competence standards to upskill homegrown talent, but also attract talent to Hong Kong 

It continues its efforts in this space and like the FCA, the HKMA launched its own Fintech Supervisory Sandbox and Chatroom to RegTech projects and ideas back in 2018. 

Regulators in other jurisdictions are also active in the wider FinTech field. 

  • Singapore and Canada: The Securities and Futures Commission (SFC) has entered into an agreement with eight members of the Canadian Securities Administrators (CSA) to establish a financial technology (Fintech) cooperation framework in 2021.
  • USA: The US Chamber of Commerce established its FinTech Innovation Initiative to raise awareness amongst the policymakers about new products services. 

RegTech is typically used in the financial services sector to enable firms to be more effective and efficient. It covers a broad range of solutions including platforms for managing workflows, risk management and audits as well as artificial intelligence, big data, cloud computing and the like. 


Firms are required to meet an ever increasing range of regulations which require management and coordination of efforts both internally and externally. Some of the benefits include:

  • Efficiencies gained by automating processes helps to increase productivity by removing manual processes and freeing staff to work on more valuable tasks
  • Helps compliance teams by automating tasks (eg gifts notifications, confirmations) and by collecting data and generating reports
  • Enables the early identification of issues to avoid risk of regulatory fines and censure – reputational risk 


Whilst technology can add a number of benefits, it also brings its own challenges: 

  • Keeping up with advancing technology to foresee inadvertent risks
  • Ensuring skillset and knowledge within firms and supervisory authorities
  • Internal factors relating to sharing data and security
  • Integration with legacy systems 

There is no doubt that RegTech enhances the performance of the financial services sector. It brings competitive edge to firms who are able to leverage the efficiencies and improved effectiveness. We can expect to see RegTech solutions develop further and supported by the regulators more coordination of efforts and improved harmonisation as regional supervisors collaborate with each other. 

How can we help? 

Ruleguard has a range of tools to help firms fulfil their obligations in the UK, Europe and APAC. Click on the links below or contact us for further information. 

Tel: 020 3965 2166 or hello@ruleguard.com 

Contact the author 


Head of Client Regulation | Ruleguard