Defining RegTech

In their 1873 satirical novel, "The Gilded Age," authors Mark Twain and Charles Dudley Warner wrote: "History never repeats itself, but the Kaleidoscopic combinations of the pictured present often seem to be constructed out of the broken fragments of antique legends."

In the novel, Twain and Warner paint a picture of a newspaper editor trying to make sense of a modern political scandal by mapping it to ancient history, noting that while the settings and names may change, the underlying human patterns remain the same.

The same principle applies to regulatory technology. RegTech may not be a single tool, technology, solution or brand-new invention. Instead, it is the pictured present, the result of a fusion of established domains, practices, technologies and evolving regulatory requirements. Domains such as privacy, cybersecurity, broader legal compliance, enterprise risk, fraud prevention, third-party risk management and others can no longer operate in silos. Practices such as governance, risk and compliance span across domains and are a critical domain in their own right. Viewed through this lens, RegTech resembles a kaleidoscope, not defined by any one single component, but by the ever changing arrangement of long established domains, practices, technologies and regulatory requirements. 

So, what is RegTech?

Long before the term RegTech was coined, financial markets were already grappling with the limits of human processing. In the late 1960s, the New York Stock Exchange was forced to close on Wednesdays because armies of clerks and messengers could not process paper trade settlements fast enough. The response was increasingly technology-driven, and, by the 1970s, included the establishment of electronic clearinghouses. This technological development helped lay the foundations for digital systems that underpin modern compliance and oversight. Today, these innovations are increasingly being grouped under the term RegTech.