In the aftermath of the global financial crisis more than a decade ago, fintech’s younger sibling was born. Regtech might be younger, but it certainly has a few characteristics of a big brother.

Regtech (regulatory technology) is the use of innovative technology to address regulatory challenges in the financial services sector, enhance compliance processes and increase transparency.

With skyrocketing levels of regulation and hawk-eyed scrutiny on data and reporting, it was a matter of milliseconds before tech innovators swooped in with solutions promising and delivering speed, efficiency and agility – every regulators dream.

It is no secret that cutting corners in compliance nowadays rarely means cutting costs. The astronomical fines slapped on banks following the crisis that ignited the regtech revolution are evidence that non-compliance is simply not worth the risk.

Thomson Reuters estimates that nearly 20 percent of a firm’s budget is spent on governance, risk and compliance to avoid hefty fines from regulators.

With increasingly complex and time-consuming compliance demands, financial institutions and wealth management companies can no longer solely rely on (or afford) human compliance officers. Moreover, it is impossible to review such complex data manually.

From following the labyrinthine audit trail of a transaction or providing anti-money laundering risk data, to performing KYC checks, automation has proved invaluable.

Cloud computing, blockchain, application program interfaces, natural language processing, machine learning, big data, data mining and analytics, and predictive analysis are all playing their part. The common objective? Streamlining and simplification.

Social media and biometrics are also being harnessed to assess anti-fraud processes, carry out client due diligence and help banks determine when they might need to file a suspicious activity report.

We must not forget that the rapid growth of fintech has increased regtech’s workload. With new technology comes more data, resulting in the need for even more efficient solutions to analyze all this data. The regtech landscape can only expand.

As the second largest investment fund center in the world (after the US) and the eurozone’s leading financial hub, Luxembourg is a prime location for regtech providers to innovate and tap into the needs of a sizeable financial market.

With the recent opening of the Luxembourg House of FinTech, and initiatives by Digital Luxembourg, including its Compliance Support Tool for GDPR, the Grand Duchy’s government is strongly backing the development of the regtech ecosystem.

And you can be sure that Luxembourg’s regulators will be cheering on those innovators as this ecosystem continues to grow!

algoreg

algoreg provides innovative compliance solutions for executives and compliance officers, including automated video on-boarding, customer risk scoring and name screening.

Finologee

Founded by co-founders of Digicash, Mpulse and Nvision, Finologee offers compliant digital KYC process automation and third-party fintech service aggregation.

Governance

Featured on the FinTech 50 list for the third year running, Governance offers a cutting-edge regulatory compliance tool that allows organizations to collect, centralize and control all data.

KYC3

Know Your Customer, Counterparty and Competition. That is the raison d’être of KYC3, a tool that consolidates and maps client information in a single dashboard.

Seqvoia

A regtech solution for the fund industry, Seqvoia helps asset managers and custodians automate the production, distribution and compliance of investment fund documentation in one single web-based platform.

Sqope

Sqope delivers high-quality intelligence reports on individuals and corporate entities, enabling finance executives to evaluate risk and make decisions.