All business sectors in today’s economy are highly regulated, but some are more highly regulated than others. Jeff Yastine, editor of the Total Wealth Insider financial newsletter published by Banyan Hill, points out finance is one of the most highly regulated. This is only logical because it deals directly with handling people’s money. Banks are where the money is, as bank robber Willie Sutton once pointed out. They face a lot of government regulation and oversight because customers must be able to trust them, or the entire financial system could fall apart.
International banks face a huge amount of regulation because they must comply with the laws and regulations of every government jurisdiction where they operate. Huge banks such as Bank of America, Citicorp and HSBC have branches in almost every country in the world. And every one of them has a different set of laws they must comply with or face legal punishment. The financial technology website Let’s Talk Payments says these banks now spend $70 billion a year just making sure they comply with every law and rule. Within three years, this total will go up to $120 billion. Read more about Jeff Yastine at Bloomberg
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— Jeff Yastine (@Jeff_Y_Guru) February 13, 2018
That’s why Jeff Yastine says a new and highly profitable new tech sector is regulation technology, or regtech. These companies assume responsibility for keeping up with every relevant change for their customers. They can afford to do so at a profit because they may charge many companies for the same access to changes. But they charge each separate company a lot less than the company would have to pay to keep up with everything by itself, in-house. And they use the latest in technology, including Artificial Intelligence, other advanced software and blockchain technology. For instance, it costs banks $10 million to require identification from all their customers so they are complying with security regulations designed to stop fraud and money laundering. But a regtech company can provide the same service to the bank for $300,000, a huge savings for the bank.
Jeff Yastine is a highly experienced financial journalist. He spent 17 years as a senior correspondent and anchor for PBS Nightly Business Report. In 2007, he and his team were nominated for that year’s Business Emmy for their reporting work on how underfunding of construction ad repair of America’s infrastructure is leading to crumbling highways and unsafe bridges. As a newsletter editor, he strives to find value stocks that will help us readers grow their wealth. More info here:https://jeffyastine.tumblr.com/