57 Pages Posted: 5 Jan 2022 Last revised: 17 Sep 2022

See all articles by Ben Charoenwong

Ben Charoenwong

National University of Singapore - Department of Finance

Zachary T Kowaleski

University of Texas at Austin

Alan Kwan

The University of Hong Kong

Andrew Sutherland

Massachusetts Institute of Technology

Date Written: September 16, 2022


Compliance-driven investments in technology—or “RegTech”—have grown rapidly in recent years. To understand how these investments affect the financial sector, we study how financial institutions respond to new internal control requirements. First, we show that affected firms make significant investments in enterprise resource planning, data management, and hardware. These investments then allow for complementary expenditures on customer relationship management tools that rely upon information quality. As a result, customer complaints and employee misconduct decline at affected firms. Additionally, market concentration increases. Our results illustrate how regulation can directly and indirectly affect technology adoption, which in turn affects noncompliance functions and market structure.

Keywords: RegTech, FinTech, technology adoption, financial regulation, compliance, internal controls, complementary investments, software bundling

JEL Classification: G23, G30, G38, L51, M42, O31

Suggested Citation

Charoenwong, Ben and Kowaleski, Zach and Kwan, Alan and Sutherland, Andrew, RegTech (September 16, 2022). MIT Sloan Research Paper 6563-22, Available at SSRN: or

Ben Charoenwong

National University of Singapore - Department of Finance ( email )

Mochtar Riady Building
15 Kent Ridge Drive
Singapore, 119245


Zach Kowaleski

University of Texas at Austin ( email )

2317 Speedway
Austin, TX 78712
United States

Alan Kwan

The University of Hong Kong ( email )

Pokfulam Road
Hong Kong, Pokfulam HK

Andrew Sutherland (Contact Author)

Massachusetts Institute of Technology ( email )

100 Main Street
Cambridge, MA 02142
United States

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