Quick answer
Regtech (regulatory technology) is the application of financial technology for regulatory and compliance requirements and reporting by regulated institutions, such as identity checks, transaction monitoring and regulatory reports[2].
Key points
- Regtech is used by regulated firms; suptech is the version used by supervisors.
- Common uses include KYC and identity verification, AML monitoring, fraud detection and regulatory reporting.
- The firm stays responsible for compliance even when software does the checking.
On this page
#Where does the word regtech come from?
It is short for regulatory technology. The UK's Financial Conduct Authority used it in November 2015, describing RegTech as new technologies that facilitate the delivery of regulatory requirements[1]. The Financial Stability Board (FSB) defines regtech as the application of financial technology for regulatory and compliance requirements and reporting by regulated institutions[2].
Worked example
Example
A payment app checks a new user's passport and selfie automatically, screens the name against sanctions lists, and later flags an unusual run of transfers for a human analyst to review. Each of those steps uses regtech. When the national supervisor analyses the reports the app sends, using its own data tools, that is suptech.
#What is the difference between regtech and suptech?
Suptech (supervisory technology) is the use of innovative technology by supervisory agencies to support supervision, in the definition used by the BIS Financial Stability Institute[3]. Regtech serves the firm being supervised; suptech serves the supervisor. The FSB found that regulated institutions mainly use regtech for fraud detection, reporting, risk management and AML/CFT, with an upward trend in KYC and identity verification[2].
#Where can I learn more?
The full guide is what is regtech. For the jobs regtech does, see KYC, AML and DORA explained.
Frequently asked questions
Is regtech only for banks?
No. Any regulated financial firm can use it, including payment firms, insurers and investment firms; the FSB definition covers regulated institutions in general[2].
Does regtech guarantee a firm is compliant?
No. Tools can fail or rely on outdated data, and the FSB notes that growing reliance on regtech can raise operational and cyber risk and perpetuate biases present in historical data[2].
Sources
- Call for Input: Supporting the development and adoption of RegTech — Financial Conduct Authority, 2015 Primary
- The Use of Supervisory and Regulatory Technology by Authorities and Regulated Institutions — Financial Stability Board, 2020 Primary
- The suptech generations (FSI Insights No 19) — executive summary — Bank for International Settlements, Financial Stability Institute, 2019 Primary
