Regulatory Technology or RegTech streamlines the complex compliance process using advanced technologies. It has achieved greater adoption not only in financial and regulatory sectors but other industries as well.
Legacy systems, increasing budgets, competing priorities, and complex regulations are some of the significant challenges facing financial services. RegTech is ready to take them on- and transcend.
Reports and Data’s recent study says there will be “an increasing demand seen for RegTech market and it is expected to reach $21.73 billion by 2027“. Regtech is moving all over the world. Amongst the global market, Europe holds major significance; however, regions like the Middle East and Asia-Pacific have the potential to expand during the forecast period, i.e., 2020-2029.
Some key takeaways from the report:
- The high level of demand for RegTech solutions intensifies as regulatory burden looms larger.
- According to the report, “The total compensation for compliance across banks varied from 2014 to 2016. It averaged 7.0% (approx) of their noninterest expenses.”
- Investment in RegTech fintech has grown considerably. And this is one of the significant reasons for driving the growth of the market. RegTech is touted to assist financial organizations with data protection and secured transactions.
- In the coming years, we’ll witness the collaboration between regulators and regtech. As the regtech funding market evolves, more investment is bound to flow.
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The compliance management segment is expected to be growing at the highest CAGR, 19.5% during the forecast period. Though the adoption rate is not consistent throughout the market. Europe, having strict regulations for data security and transactions, leads with the highest adoption rate
Over the years, we have seen, RegTech evolving in different versions, ReTech 1.0, 2.0, and 3.0. These versions differ from each other due to the associated parameters. RegTech is now expected to be shifting from the “RegTech 2.0-Know Your Customer” model to “RegTech 3.0-Know your Data” as financial industries start analyzing risk and regulation as data and prediction problems that could be addressed by technology.
Besides non-compliance, cyber-attacks are another major challenge for banks and Fintech. And this calls for an immediate need to invest in RegTechs as they will help mitigate such risks. The good news is that firms have started realizing the importance of RegTech and are investing heavily in them to prevent fraudulent activities.
