CFA Institute

FinTech and RegTech in a Nutshell, and the Future in a Sandbox

By Douglas W. Arner, Jànos Barberis, and Ross P. Buckley

Interaction between finance and technology is not novel. The abacus is a testament to the long-standing relationship between the two. But the 2008 global financial crisis (GFC) represented a pivotal moment that separated prior phases of the development of financial technology (FinTech) and regulatory technology (RegTech) from the current paradigm.

Today, FinTech has entered a phase of rapid development marked by the proliferation of startups and other new entrants, such as IT and ecommerce firms that have fragmented the financial services market. This new era presents fresh challenges for regulators and highlights why the evolution of FinTech necessitates a parallel development of RegTech. In particular, regulators must develop a robust new framework that promotes innovation and market confidence, aided by the use of regulatory “sandboxes.”

Currently in its second stage of development, RegTech is being used by both institutions and regulators to address increasingly cumbersome compliance processes. But regulators have yet to unlock the transformative potential of RegTech. We argue that certain RegTech developments today are highlighting the path toward another paradigm shift, which will be typified by a reconceptualization of the nature of financial regulation. This “RegTech 3.0” will involve a regulatory approach that is as datacentric as the markets it monitors.

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Head Office
EMEA Office
67 Lombard Street
7th Floor
London
EC3V 9LJ
United Kingdom
Contact
Sarah-Jane Purvis Tel. 020 7330 9559
Company website:
http://www.cfainstitute.org
Year Founded:
1947
No. of investment offices worldwide:
4

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