Role of RegTech in the Evolving Financial Sector

Offering comprehensive financial services isn’t an easy job. The institutions offering these services have to comply with a hoard of regulatory norms and conditions. For this, these companies have to understand, implement, and regularly monitor whether they are complying with the set standards. This is obviously a tedious and complex job. To address this problem faced by many financial services companies, specialized technology companies have come up; these firms are known as RegTech companies.

RegTech companies and the ever-evolving global banking industry

The 2008 financial crisis highlighted the importance of having strict regulatory oversight to avoid financial frauds and embezzlements. Hence, the number of regulations and standards increased and along with that the need for RegTech services also ballooned. It has been seen through several studies that around 15% of any banking company’s workforce is dedicated to managing regulatory compliances, while at the same time there is a workforce crunch to provide essential banking services to the common public. RegTech can help banks with this; by using emerging technologies such as blockchain, data analytics, artificial intelligence, and cloud computing, RegTech companies help in simplification of data management and reporting. Moreover, Since RegTech services take care of regular reporting and regulations reframing, banks can significantly reduce the time required for client onboarding and ensuring a fraud-free environment.

Market dynamics of the RegTech industry

The RegTech market is set to witness huge growth in the coming period owing to the rising collaboration between the national regulators and various financial institutions. Apart from this, the growing adoption of advanced technologies such as blockchain and data analytics by the global financial sector might create numerous growth opportunities in the market. With many countries across the globe framing their own data protection rules, the need for RegTech companies has further increased which will further strengthen the position of the market.

On the basis of application of RegTech services, the risk and compliance management segment is expected to collect an absolute revenue of $18004.03 million. On the other hand, the anti-money laundering and fraud management, and regulatory reporting segments are anticipated to collectively gather $22314.56 million from 2022 to 2032.  Based on region, the India RegTech market, in this same period, is projected to register the highest CAGR of 30.5%.

In the last few years, many RegTech companies have launched their own platforms and services which are estimated to create favorable conditions for the industry’s growth. In April 2021, NICE Actimize, a software company, announced the launch of an AI-powered RegTech platform for insurance services. In March 2023, WCKD RZR, a RegTech firm announced the launch of a similar platform called Data Now.

To summarize, the massive surge in the global RegTech market is on the account of rising collaboration between governmental authorities and financial institutions. Innovative product launches by leading players of the industry might open up new growth avenues in the coming period.

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