For many institutions, the regulatory vat has been overflowing for some time. Gridlock in Washington only underscores that nothing meaningful will change soon on the "supply" side of compliance.

But there's a consensus that something has to change. That something may be the industry's compliance solutions.

And regtech may be the answer if the industry goes in with open eyes.

In a white paper issued last year, FCA stated: "RegTech is a subset of Fintech that focuses on technologies that may facilitate the delivery of regulatory requirements more efficiently and effectively than existing capabilities."

That's a concise definition of a trend that grows broader and deeper, changing as you read this article. Regtech—we'll use that spelling in this article—is spawning all kinds of activity in financial services—from a growing number of companies to newly formed associations to brand-new conferences and strong investor interest. Regtech is, and will be, applied to traditional compliance challenges, for sure, but it also may drive new ways of promulgating and analyzing regulations themselves.

Scott Pearson, partner at Ballard Spahr LLP, works with banks and other players on compliance issues, and heads the firm's marketplace lending task force. He sees the potential help regtech may bring, but notes how quickly rules change and that there is a danger of obsolescence. He suggests that regulators will not accept regtech as a black box they will leave unopened, but instead may ask to see the code underlying the tech.

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