RegTech: Where We Are and Where We Can Go

On June 23, 2017, Hogan Lovells hosted a RegTech Summit in conjunction with the release of The Future of RegTech for Regulators: Adopting a Holistic Approach to a Digital Era Regulator, a white paper co-authored with our strategic partner, Innovate Finance.

Keynote speaker Jonah Crane, former Deputy Assistant Secretary in the Department of Treasury and current “Regulator in Residence” at FinTech Innovation Lab, addressed work the FinTech Innovation Lab is doing in New York, where alumni have raised US$463 million in capital and created 385 jobs. FinTech Innovation Lab provides a good illustration of the symbiotic relationship between start-ups, established industry players, and government (both regulators and cities/states). As the Regulator in Residence, Jonah steps into the role of various state and federal regulators to identify potential compliance problems and to encourage all FinTech companies to consider consumer protection and regulatory compliance obligations throughout the development of new products and services.

The Summit included a panel of regulators, including representatives from the OCC, the Federal Reserve, and the CFPB, as well as the U.S. Commercial Director of Onfido, the vendor of a RegTech identity verification program. The panelists noted that the federal financial regulators are interested in the development of FinTech and RegTech solutions and are working with industry to try to bring new tools to market. For example, the members of FFIEC are working on an examination modernization program that will provide more freedom to include technology in the examination process. The CFPB is working on a national IT supervision program that will include new software solutions and automation to create efficiencies in the exam process.

The Summit concluded with a sandbox fireside chat between Schan Duff of the Aspen Institute and Keith Saxton, formerly with IBM, which provided an overview of the exciting work taking place in sandboxes around the globe. As the U.S. has a rather fractured federal financial regulatory system, industry sandboxes may be a better bet than regulatory sandboxes. However, the best innovations usually come about due to government mandate, so the chat suggested U.S. government become more involved and more forward looking in order to boost innovative solutions to compliance issues.


  • Regulators need to have an open mind. They should focus on safety and soundness, consumer protection, and regulatory compliance, but have an open mind about what exactly that might look like.
  • Sandboxes can be useful, but are not necessary to move forward. State statutes and regulations can basically act as sandboxes, as well as potential revenue and job-creators for states.  As stated in the white paper, the states are meant to act as laboratories in the United States and they have been doing pretty well so far as FinTech labs.
  • The sales/procurement process is one of the biggest hurdles to the adoption of RegTech solutions. Financial institutions must follow a long and arduous process in order to adopt new compliance solutions, including discussion with and approval by the relevant regulators, which can be difficult to obtain in a timely manner.
  • Both regulators and industry should focus on the spirit, rather than the letter of the law.  This ties in with point one; the overarching goals of safety and soundness, consumer protection, and regulatory compliance can be met through a variety of methods. Industry must develop its new products and services with compliance obligations at the forefront, but regulators must be adaptable to different delivery systems.
  • Patience is a virtue. RegTech is not likely to be adopted on a large scale for several years and it may not look at all like today’s options; continuing to develop solutions and keeping an open dialogue between regulators and industry is essential to creating a more efficient and effective financial services system.

RegTech provides an exciting opportunity to help shape the future of financial regulation and will likely require infrastructure and rule changes to realize its full potential.  Hogan Lovells remains interested and invested in helping industry develop the best solutions and engaging regulators in the conversation.

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