RegTech—the application of modern information technology in regulatory affairs: areas of interest in research and practice

• DOI: http://doi.org/10.1002/isaf.1479
• Date: 01 October 2020
• Author: Kevin Merz,Michael Becker,Rüdiger Buchkremer
• Published date: 01 October 2020

RESEARCH ARTICLE

RegTech—the application of modern information technology in

regulatory affairs: areas of interest in research and practice

Michael Becker

1

| Kevin Merz

2

| Rüdiger Buchkremer

3

1

FOM University of Applied Sciences,

Stuttgart, Germany

2

IBM Deutschland GmbH, Ehningen, Germany

3

FOM Institute for IT-Management and

Digitalization, Düsseldorf, Germany

Correspondence

Michael Becker, FOM University of Applied

Sciences, Rotebühlstraße 121, 70178

Stuttgart, Germany.

Email: michael.becker3@fom-net.de

Summary

We provide a high-level view on topics addressed in scientific articles about regula-

tory technology (RegTech), with a particular focus on technologies used. For this pur-

pose, we first explore different denominations for RegTech and derive search queries

to search relevant literature portals. From the hits of that information retrieval pro-

cess, we select 55 articles outlining the application of information technology in regu-

latory affairs with an emphasis on the financial sector. In comparison, we examine

the technological scope of 347 RegTech companies and compare our findings with

the scientific literature. Our research reveals that ‘compliance management’is the

most relevant topic in practice, and ‘risk management’is the primary subject in

research. The most significant technologies as of today are ‘artificial intelligence’and

distributed ledger technologies such as ‘blockchain’.

KEYWORDS

artificial intelligence, compliance management, distributed ledger technologies, regulatory

technology, risk management

1|INTRODUCTION

Owing to the increasing digitization in the financial industry, new

technologies and technology companies have disrupted the finan-

cial sector. Financial technology (FinTech) firms and applications

have started to change various aspects of the financial market.

According to Gabor and Brooks (2017), payment systems, funding

platforms, and financing procedures in particular have been

impacted by new FinTech systems and companies. Concerning risk

and compliance management activities of financial institutions (FIs),

new technological solutions are referred to as regulatory technol-

ogy, or RegTech (Institute of International Finance, 2015).

According to Butler and O'Brien (2019), RegTech can be regarded

as a new and vital dimension of FinTech. Compared with other

current innovations, RegTech is at an early stage of development

(Institute of International Finance, 2016b).

According to a survey with 62 executive risk managers and com-

pliance officers of FIs in Germany, 89% of the respondents are con-

vinced that there is a significant need for new technological solutions

in the risk and compliance management area to manage the increasing

amount and complexity of regulations more efficiently in the future

(Becker & Buchkremer, 2018). Therefore, our research objective is to

provide an overview of the current state of RegTech in the financial

industry. For this purpose, we extend the queries related to our litera-

ture search to identify various aspects related to regulatory affairs in

combination with modern information technologies (ITs). In a subse-

quent step, we link the literature insights to various business areas of

operating RegTech firms in order to compare relevant aspects in the-

ory and practice.

This research was conducted without any sponsoring.

Received: 11 December 2019 Revised: 25 March 2020 Accepted: 31 May 2020

DOI: 10.1002/isaf.1479

This is an open access article under the terms of the Creative Commons Attribution License, which permits use, distribution and reprodu ction in any medium,

provided the original work is properly cited.

© 2020 The Authors. Intelligent Systems in Accounting, Finance and Management published by John Wiley & Sons Ltd

Intell Sys Acc Fin Mgmt. 2020;27:161–167. wileyonlinelibrary.com/journal/isaf 161