PRESIDENT elect Donald Trump is pro-business and anti-red tape. But what if your business is red tape?
Companies whose technology helps banks and investors cope with the welter of post financial crisis regulations and avoid increasingly hefty fines — a sector known as “regtech” — are sanguine about Mr Trump’s pledge to dismantle some of those reforms.
Their equanimity is based on a belief that if regulations are replaced rather than scrapped and the overall system of rules becomes more fragmented, financial firms will need their systems to navigate the new landscape.
“Change is itself a driver of regtech adoption,” said David Buxton, the chief executive officer of compliance startup Arachnys.
Founded in London in 2010, Arachnys helps financial services firms carry out anti-money laundering and other compliance checks by automating the analysis of more than 16,000 public and private sources of data.
It’s one of a growing cohort of mostly private companies that use new digital technologies, such as cloud computing and big data processing, to help financial institutions comply with regulation ranging from rules on trading conduct to know-your-customer procedures.
Despite the results of the US election and expectations that the new administration will take a softer stance on the enforcement of financial rules, Arachnys is moving forward with US expansion plans and renting out bigger office space in midtown Manhattan.
“The top 10 deals that my sales team are currently focused on, not one single one has voiced any concerns about ‘wait and see’ in the regulatory environment,” Mr Buxton, who is currently based in New York, said.
Regtech companies such as Arachnys have become the new darlings of the private investment world as financial firms are expected to accelerate their spending on compliance technology to $US72 billion ($F153b) by 2019 from $US50.1b ($F106b) in 2015, according to research firm Celent.
Venture capitalists have invested $US2.3b ($F4.9b) in regtech start-ups globally since 2012, according to data provider CB Insights.
Funding volume is expected to drop 2 per cent this year to $US576m ($F1b) compared with 2015, but activity is expected to grow 15 per cent to 90 deals, according to CB Insights.
