FinTech has undoubtedly become one of the hottest topics in business. Web searches for the term fintech in Google have grown exponentially in the last several years, so it’s obvious that people are curious about it and more and more businesses are considering getting in to this new trend.
Having FinTech knowledge gives you a competitive advantage in your business, because FinTech experts are in high demand globally.
There are many definitions of FinTech, butthe one is the most relevant: FinTech companies are businesses that leverage new technology to create better financial services for both consumers and businesses. FinTech is also frequently used as an umbrella term for various subcategories, such as WealthTech, RegTec and LegalTech.
Now RegTech and LegalTech are our main focus as legal advisors.
RegTech is a community of technology companies that solve regulatory challenges through automation. The increase in major regulatory policy and the rise in digital products have made it imperative for companies to check for and implement compliance issues, and this can be difficult with old, manual processes.
LegalTech combines the nature of legal technologies and their relationship with data, the Internet of Things (IOT), cybersecurity, and distributed ledger technologies as well as ethical considerations of the technological advancement.
RegTech is the management of and compliance with regulatory processes within the financial industry, using technology to address regulatory monitoring, reporting, and ongoing compliance. The predominantly cloud-based, SaaS offerings to help businesses comply with regulations efficiently and more cheaply act as the glue between the various sectors of the financial services industry described earlier.
LegalTech describes technological innovation to enhance or replace traditional methods for delivering legal services across financial services and beyond. This innovation includes document automation, predictive artificial intelligence, advanced chat bots, knowledge management, research systems, and smart legal contracts to increase efficiency and productivity and reduce costs.
With the use of big data and machine-learning technology, RegTech and LegalTech firms reduce the risk to a financial institution’s compliance and legal departments by identifying potential threats earlier to minimize the risks and costs associated with regulatory breaches and any legal work. RegTech firms can combine information from a financial institution with precedent data extracted from prior regulatory events to forecast probable risk areas that the institution should focus on. LegalTech firms can help financial institutions draft documents, undertake legal research, disclose documents in litigation, perform due diligence, and provide legal guidance.
FinTech firms need to be proactive and establish business models that fulfill the financial services regulatory requirements. Part of their competitive advantage should be to mitigate risks related to any supervisory requirements. Regulators will determine new rules that consider new or changing FinTech products and services and their related emerging technologies.
Therefore, adopting a framework that focuses on aspects such as capital, controls, governance, liquidity, and operations will ensure that the company meets existing and future requirements.
