The world is becoming a smaller place each and every day. Thanks to years of digital innovations, it's now easier than ever to start a globally operating business from the comfort of your couch.All you need to get started is a laptop, internet connection and a great idea. But this quickly changes when you're scaling up — suddenly you need to take care of employees, office space and financials.
One of the biggest challenges of running a growing company is having to comply with local regulations. Regardless of where you're based, every country imposes a set of rules on businesses, requiring everything from transaction reports to data privacy compliance. Most of these don't just apply to corporate entities — SMEs often have to comply too.
And that's exactly where regtech comes in. This new vertical recently branched off from fintech, spawning services focused on making it easier to comply with regulatory requirements. With local and international regulations changing all the time, there's a huge opportunity for this new sector to streamline these processes and save companies a whole lot of time.
2018, the year of GDPR
Take for example the GDPR, also known as the EU General Data Protection Regulation. As the biggest change in data privacy regulation in the last 20 years, it's bound to have a big impact on any company that keeps customer data.
When the law goes into effect in May 2018, all businesses based in an EU member state have to comply with new rules designed to protect citizens from an increasing amount of data breaches. Simply put, we're constantly giving out sensitive information to companies, which are doing a really bad job at keeping it safe. GDPR is aiming to change that.
However, the new legislation comes with a lot of critical changes, which will require many businesses to change their procedures and policies for data capture. If your company deals with private user data of any kind, chances are the changes will affect you.
From May onwards, every company will have to keep a detailed record of when users give consent for them to keep their data. This can't be done with a pre-filled checkbox hidden at the end of a form — the user has to proactively accept the storage of their data in your systems.
Taking accountability for its customers, Xpenditure is finalising the adjustment of its services to ensures a smooth transition coming May — all users will be compliant with the new rules from day one, without having to adapt anything on their side.
Integrating local regulations
There's also lots to win on a national level. Take Germany, where employee expense management is notoriously complicated. A cocktail of specific local regulations creates a unique situation — for example, German per diems. These special rules often result in a lot of manual input and calculation, with small mistakes potentially leading to unexpected fines and other implications.
Again, Xpenditure aims to give its customers a seamless integration with these local requirements. Per diems for Germany and several other countries are automatically generated in the platform and calculated based on the trip details. This ensures that all reports are fully compliant with the local laws.
Regtech isn't just useful for established companies — it can also provide individuals with powerful tools.
Stripe Atlas is another great example of an incredibly effective regtech product. For a one-time fee, it offers entrepreneurs worldwide an all-inclusive package for starting a new US-based business. Atlas takes care of pretty much all bureaucratic hassle, like incorporating the company in the US and setting you up with a local bank account. For an added fee, they'll even help with preparing your tax returns.
No entrepreneur wants to spend hours filling out paperwork and dealing with the government to get their business up and running. That's why regtech can be such a powerful asset — it saves precious time, which you would much rather spend on anything else than regulatory administration. The rise of Regtech will certainly boost innovation and entrepreneurship.
A regtech future
Even though the term regtech was coined only 2 years ago, it's already having a profound impact on how companies work. Deloitte recently published RegTech Universe, a report giving a closer look at the global state of regulatory technology. In it, the company identified over 150 regtech startups worldwide — an impressive number for an industry that's just getting started.
This really goes to show the potential of the vertical. While many SMEs are already experimenting with regtech, it's still uncharted territory for bigger corporates, multinationals and banks. But eventually they'll start seeing the benefits, and that's when it'll start having a massive impact — countless hours could be saved every day by implementing regtech on such a large scale.
Sure, it might not sound as sexy as augmented reality, but regtech’s impact might end up being a whole lot bigger.