As fraud in FS increases, the demand for RegTech grows

By Puja Sharma

The global RegTech market reached a value of $8.7b in 2021. Looking forward, the publisher expects the market to reach $29.2b by 2027, exhibiting at a CAGR of 22.7% during 2022-2027.

RegTech, or regulatory technology, refers to the solutions used to keep track of an organization’s internal regulatory needs. Machine learning (ML), cloud computing, and blockchain technologies are used to streamline and standardise compliance processes, as well as uncover inconsistencies and issues in digital payment platforms. It’s also used for Know-Your-Customer (KYC), transaction monitoring, customer credit scoring, anti-money laundering (AML) screening, trade data tracking, fraud prevention, and compliance risk analysis in banking and finance.

It can be used for identity management reporting, risk management, and real-time transaction tracking, and it can be installed on-premises or in the cloud. RegTech helps to digitise manual reporting and compliance processes while also providing increased agility, speed, integration, and analytics capabilities.

Bigger players dominate the space

The large enterprise segment dominates the RegTech industry, which can be linked to the fact that these businesses deal with a lot of data and are consequently forced to use regulatory programs. As a result, the large number of publicly traded companies in this industry underscores the relevance of RegTech solutions and services.

Growing trends

Significant growth in the BFSI industry across the globe is one of the key factors creating a positive outlook for the market. Moreover, the increasing occurrence of fraudulent activities across the internet leading to financial losses is providing a thrust to the market growth.

RegTech aids in the accurate detection of illicit activities and minimizing the risks of errors due to human intervention. In line with this, the widespread adoption of RegTech for non-finance industries is also contributing to the growth of the market.

Additionally, various technological advancements, such as the integration of connected devices with the Internet of Things (IoT) and Artificial Intelligence (AI) solutions, are anticipated to drive the market toward growth. These technologies aid in the automation of employee surveillance, compliance data management, fraud prevention, and AML activities. Other factors, including the adoption of advanced technological solutions for faster and more secured online transactions, along with the implementation of favorable government policies, are anticipated to drive the market toward growth.

As long as North America continues to be a leader, consumers will continue to adopt the product at a rapid pace. The reason for this is the early adoption of RegTech solutions by North American financial institutions, which make use of technologies like Artificial Intelligence (AI), Machine Learning (ML), Blockchain, Big Data, and cloud computing to minimise compliance costs.

The United States and Canada are part of North America’s industrialised economies. These countries are far ahead of their peers when it comes to technology and application deployment Furthermore, North America’s industry is expected to expand due to the need to conform to strict regulations.

In the future, Europe is projected to remain the second-largest RegTech market in the world. FinTech companies’ investments in the region have contributed greatly to the region’s growth. The fastest growth will be seen in the Asia Pacific during the forecast period. Latin America and the Middle East and Africa are expected to have a lucrative market for RegTech solutions.