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The wild world of regtech

The global regtech market is exploding. By 2023 revenues are expected to be worth $12.3 billion, growing at a compound annual growth rate of 25.4% over the next five years[i]. The pace at which it is evolving has even led Deloitte – who we are proud to be collaborating with on some new client engagements – to call regtech “the new fintech”[ii].

There are so many new players racing towards regtech because there are big problems to solve. Banks and financial services firms are grappling with an overwhelming volume of complex regulatory change and 2,500+ compliance rule books globally. With the cost of compliance to the banking industry estimated to be $270 billion each year, firms need help to the root causes of regulatory risk as efficiently as possible.

However, as with any new and fast-growing industry, the plethora of new tools and technologies has become difficult to navigate. Market consolidation will happen in the next 2-3 years, but right now banks and financial services firms aren’t sure which direction they should be looking to drive successful adoption.

Competitive chaos 

Competition in the regtech market is, of course, a good thing. This is a relatively new industry and new entrants will drive innovation. You only need to look as far as Allen & Overy's Fuse programme to see how progressive businesses in the legal and regulatory tech ecosystem are delivering cutting edge innovative work.

The problem is that we’re seeing too many other firms simply follow the money and rush new solutions to market, without an in-depth understanding of the regulatory landscape – not to mention the intricacies of the industries they are serving. For a very small minority, regtech has been reduced to a trend or a buzzword, when it is in fact a movement. A movement which has the potential to transform the banking sector.

Regtech resolutions

When considering different vendor propositions, it’s important to investigate the team behind the tools. You could have the most seasoned technologists working on a potential solution, however it’s unlikely they will be able to fully solve regulatory challenges without working with legal and regulatory analysts, data scientists and risk practitioners. A 360-degree picture is critical. Also, take note of where the team is based. If you’re running a global business, you will benefit from a global team with feet on the ground in your core markets.

Next, look for evidence of close collaboration with major regulatory authorities. This is a sign that the regtech business is established, mature, and can be trusted to tackle the biggest risk for the world’s top 20 banks today.

Conversations with vendors should never just centre around why their technology is the best on the market. It doesn’t matter if it is the best black box if a vendor is not skilled in getting it to work for the customer. The focus needs to be on how adoption can be successful, sustainable, and not disruptive to an organisation. 

Compliance conclusions

This is a dynamic time for the regtech market. There is still huge potential for new and innovative solutions to tackle complex compliance challenges - as demonstrated by the level of market growth expected over the next five years. Yet until market consolidation happens, banking and financial institutions need to be able to cut through the noise. Reducing overheads and improving stakeholder outcomes means staying focused on the things which matter: team, relationships, global reach and a focus on successful adoption.  




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John Byrne

John Byrne



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25 Jul 2018



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This post is from a series of posts in the group:

Banking Regulations

Discussion around current trends in regulations for banks globally

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