10 RegTech Startups transforming compliance

Regulatory Technology, helping navigate the complexities of compliance

Regulatory Technology, known as RegTech, refers to innovative improvements in compliance. Granted, it doesn’t sound particularly gripping, but it’s increasingly important to businesses, becoming essential in a data-saturated society that needs quality cybersecurity.

RegTech has a close relationship with FinTech, especially following the infamous banking crises. Businesses now have to comply with exhaustive regulations set out by organisations such as the Financial Conduct Authority. However, by using software like cloud computing, data visualisation and blockchain, RegTech makes compliance much easier.

In 2015, the Global Governance, Risk and Compliance Survey stated that adopting RegTech would lead to “operational efficiencies and cost benefits”. So, which companies are working towards better compliance and regulation, and how are they doing it?

1. AlgoDynamix
AlgoDynamix officially started in 2014 and uses adaptive algorithms to detect disruption in finance. By scanning real-time sources, the software analyses the behaviour of buyers and sellers in the market. AlgoDynamix then makes predictions about potential price movements, sometimes days in advance. The team met at the University of Cambridge and have enriched their deep data software with years of academic research. Knowing where the market is likely heading is obviously hugely useful for financial organisations, especially asset managers, who can then prepare for fluctuations.

2. CheckRecipient
CheckRecipient is a London-based cybersecurity startup founded in 2013. Simply put, the company checks that info is sent to the right person. The startup uses an AI and machine learning platform called Guardian, which analyses data points and flags up emails with unusual recipients or sensitive content. This ensures that messages are not misaddressed, therefore protecting the data of both the recipient and the company. CheckRecipient also predicts and prevents IP (intellectual property) theft by tracking employee emails. The company has been shortlisted as a finalist in the Info Security PG 2017 Awards.

3. Credit Benchmark
Founded in 2012, Credit Benchmark is another London-based RegTech startup that gathers credit risk estimates from leading global banks. The data is pooled and then anonymised to protect the banks that provide the information. The estimates are used for the benefit of other financial institutions, including banks. By viewing the credit risk data, Credit Benchmark’s clients can work out the best strategy for their own risk management. The company was founded by ex-Goldman Sachs employee Mark Faulkner, and closed a $20 million funding round in 2015. Credit Benchmark is one of many startups using data analysis and visualisation.

4. DarkTrace
DarkTrace is a UK cyber defence startup founded in 2013. DarkTrace has its origins in the Mathematics department of the University of Cambridge. The RegTech company uses Enterprise Immune Security technology to detect cyber threats. The platform is based on the human immune system, continually evolving in order to recognise even the slightest anomalies. This biological approach to software development has created a unique product which, unlike other services, can flag up completely new threats. At the Techies 2016, DarkTrace’s Enterprise Immunity Security was awarded ‘Best Security Technology’. According to the startup, they have set the standard for all cyber defence companies. Last year, DarkTrace raised $64 million in a series C funding round.

5. Elliptic
Elliptic describes itself as the global standard for blockchain intelligence, and has provided RegTech services for the financial sector since 2013. The startup identifies illegal activity on the Bitcoin blockchain, as well as providing proof of identity for Bitcoin users. Their technology is a complex, proprietary database – in other words, Elliptic collects and constructs private data sets that are only accessible using a password. Their clients include financial organisations, but also law enforcement agencies who use Elliptic’s data to investigate suspicious activity. This is one example of how traditional security is evolving as a response to disrupted crime. The company closed a $5 million series B funding round early last year.

6. Global Fund Watch
Swedish RegTech company Global Fund Watch was founded in 2015, and since then has built a portfolio of almost 800 global clients. The firm cites the latest financial crisis as an indicator that compliance risk and management needs improvement. To address this, Global Fund Watch offers a digital service that stores reliable data and shares it with intended, approved recipients. The aim is to free clients from monotonous administration, leading to improved analysis and due diligence (AKA compliance efforts). Their target market is banks, insurance companies, and financial advisors.

7. IdentityMind Global
IdentityMind Global is a U.S. company set up in 2014 and based in California. The firm delivers an on-demand analysis platform which works to detect and reduce fraud in banking and e-commerce. Identity Mind also provides real-time risk management services, which track the different contributors in transactions. They serve payment service providers, online merchants and banks. As well as fraud prevention, the business has created a customer ID program to enhance KYC (Know Your Customer). KYC security is vital to ensuring that businesses are protected from potentially corrupt customers.

8. Tradle
U.S. startup Tradle was set up in 2014 and was accelerated by well-known FinTech accelerator Startupbootcamp. The company simplifies and secures KYC requirements using blockchain technology. Tradle is unique because it favours user-controlled KYC and wants customers to get something in return for KYC processes. Instead of relying on tech like the cloud, Tradle utilises communal networks. The startup also improves the accessibility of KYC data for auditors. Tradle raised just over $16 thousand in its first funding round. Despite somewhat modest investment, the company reflects the new community spirit that has emerged within FinTech.

9. Trulioo
Established in 2011, Canadian startup Trulioo claims to be global leaders in electronic I.D. verification. The firm uses data analysis and open APIs to enable instant verification of identities and addresses. Trulioo collects data from social networks, credit files, government records and mobile apps. By making sure they serve legitimate customers, financial organisations protect themselves against fraud. Trulioo’s clients range from payment providers to online gaming networks. The service currently operates in 400 countries and has received total investment of $23 million. The company’s main concern is to re-establish trust in the financial sector.

10. Suade
Suade is a promising UK RegTech startup founded in 2014. They offer ‘regulation as a service’ in the form of an open platform, which collects real time data about regulations and applies them directly to the client. Like Tradle, Suade believes that the ultimate beneficiary should be the customers of financial organisations, and wants to achieve transparency in the financial sector.

This list provides a glimpse into the growing world of RegTech, which has expanded rapidly after renewed funding in 2015. Through cloud-based services, blockchain, AI, deep learning and a plethora of data technologies, startups are helping clients to navigate increasingly complicated regulations and compliance. However, fears over the plausibility of blockchain technology could pose a problem for some RegTech companies and the businesses they serve. As the financial sector evolves, so must the services designed to protect it. In the face of ubiquitous cybersecurity issues, RegTech has a very important role to play.