The RegTech Ecosystem
The RegTech Ecosystem consists of four key stakeholders: Regulators, RegTech Firms, Professional Service Providers and Financial Institutions.
The Regulator has a crucial role to play in encouraging dialogues between stakeholders and collecting market sentiments. The shape of the industry largely depends on the laws and regulations governing the jurisdiction. In some places, regulations could be conducive for technological innovation and open for business to experiment its adoption. However, jurisdictions with restrictive regulations could impede innovation and slow down the pace of development.
For most part of the world, we anticipate that the Regulators will continue to promote innovation around regulatory compliance and adopt an increasingly proactive role in driving efficiency and collaboration across the different parts of the RegTech ecosystem. Furthermore, to assist in the development of common integrated standards and guidance on the rules of engagement. Most importantly, Regulators should conduct progress initiatives to manage internal changes resulting from RegTech, including horizon scanning from a global perspective.
The RegTech Firms are the producers of RegTech Solutions and stand at the frontier of technological innovation. Their most important role at this point is to create an understanding of engagement between businesses and the regulator to align solutions with regulatory and risk management frameworks.
We are looking to these firms to develop innovative tech solutions that meet business and regulator needs and are compatible with wider risk management frameworks and regulatory requirements. Of course, we are also expecting that the solutions are forward looking and adaptable to changes in the future.
The Professional Service Providers work across the ecosystem to understand requirements, needs and solutions. As RegTech is still in the nascent stage, it is important for the professional service providers to utilise their industry insights and networks to connect RegTech providers, buyers and also investors. With many startups emerging, they will play a crucial role in supporting the setup and due diligence for the new market entrants.
To get the ecosystem into good shape, we need them to drive the cohesion of regulatory standards, institution needs and vendor solutions while providing regulatory, systems and compliance transformation advisory support, including proactively managing risks associated with implementing new RegTech solutions.
Last but not least, the Financial Institutions are, of course, a big stakeholder in the RegTech ecosystem. Their main challenge will be to pick and choose the best and most feasible RegTech solution which can be integrated into their business. To do so, they must develop their RegTech strategy and road map, putting consideration into the long- and short-term horizons.
In the near term, we do expect to see more financial institutions begin to adopt RegTech solutions and even develop such solutions in-house.