Regulatory technology

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Regulatory technology, Abrv: RegTech, is the use of information technology to enhance regulatory and compliance processes. RegTech is most usefully applied to heavily regulated industries and activities such as financial services, gaming, healthcare, pharmaceutical, energy and aviation. RegTech puts a particular emphasis on regulatory monitoring, reporting and compliance and aims to enhance transparency as well as consistency and to standardize regulatory processes, to remove ambiguity from regulations and provide higher quality outcomes at a lower cost.^[1]

RegTech to date has been focused on the digitization of manual reporting and compliance processes in the financial services industry, for example in the context of know your customer requirements, and is often mis-attributed as a subset of FinTech. Its application to wider industries, such as energy,^[2] confirm that RegTech is a subset of GovTech.^[3]

RegTech offers significant cost savings to industry and regulators and a 2016 academic paper suggested that the potential of RegTech is far greater stating that "it has the potential to enable a close to real-time and proportionate regulatory regime that identifies and addresses risk while also facilitating far more efficient regulatory compliance".^[4]

In contrast, a 2024 empirical study focusing on a regulatory change inducing United States–based financial advisers to adopt regtech around 2014 finds that overall, the damages avoided from reduced customer complaints are around one-tenth of the average costs reported in industry reports.^[5] However, there may be other indirect benefits from regtech that are not considered in the study.