Technology has long been used to help firms comply with financial and other regulations, but never has it been more in demand.

The marriage of regulation and technology – or RegTech – is increasingly seen as ’the next big thing’ to help firms cope with the elaborate web of data and reporting requirements they deal with.

On the side of the regulated, the world’s largest financial institutions are spending more than a billion dollars a year on increased regulatory compliance, according to TABB group, an international research and consulting firm, and global demand for compliance software is expected to exceed 100 billion dollars by 2020.

Dubbed ‘the new FinTech’ by Deloitte in 2015, RegTech has been steadily growing since then, particularly in the US, Canada and the UK. Regulators also are considering how to apply technology to meet and simplify regulatory requirements. For example, UK’s Financial Conduct Authority (FCA) uses big data analytics to more proactively protect consumers’ interests.

The International RegTech association (IRTA) defines it as a ‘digitisation’ of the regulatory process, saving firms money, time and billions in potential fines.

For accountants, the benefits of RegTech are endless: not only does it make good old-fashioned regulatory compliance easier, it can also help detect real-time market or operational risks, and set up ‘know your customer’ procedures to aid due diligence and combat financial crime.

The RegTech umbrella covers a variety of technologies, including data analytics, cloud computing, machine learning, voice-to-text capabilities, blockchain and biometrics. A concrete RegTech project, IRTA says, could be a new formatting language for financial regulation (for example, XML) that would be machine readable and could automate reporting across regions and countries.

RegTech pioneers say they can help firms handle anything from the General Data Protection Regulation to the markets in financial instruments directive.

The US-based Centre for Global Development has even pointed to RegTech as an answer to the problem of ‘de-risking’, where new anti-money laundering or terrorist financing rules have had a chilling effect on ‘riskier’ investments, especially in developing countries.

But there are hurdles for RegTech companies wanting to scale up their business: a lack of system interoperability and standardisation means information is often ‘siloed’ within banks, according to the Institute of International Finance, while recent research from Burnmark, a Fintech research company, shows that 50% of banks are hindered from adopting new technologies because of internal bureaucracy.

And Regtech itself is still a niche market, requiring much more collaboration between disparate sectors – regulators, banks, software developers and venture capitalists.

Come along to Accountancy Europe’s Digital Day on 19 June to find out more.