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Friday 14 December 2018

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RegTech spending to exceed $115bn by 2023

Written by Peter Walker
19/09/18

Spending on RegTech platforms will exceed $115 billion by 2023, up from an estimated $18 billion in 2018.

Analysis from Juniper Research found that increased regulatory pressures, as demonstrated by the recent General Data Protection Regulation (GDPR) implementation, are driving businesses towards regulatory technology solutions to meet greater compliance challenges.

The report also highlighted that the sharp increase in RegTech spending - an average of 45 per cent per annum between 2018 and 2023 - was far higher than that for compliance spend as a whole (17 per cent), reflecting the rapid migration of spend to RegTech from traditional methods.

Juniper suggested that Know Your Customer (KYC) checks for anti-money laundering are ripe for disruption by artificial intelligence (AI) solutions, due to the inefficiency of traditional, paper-based systems.

It forecast that across banking and property sales, annual gross cost savings from AI introduction for KYC will exceed $700 million by 2023, a nine-fold increase over 2018.

Research author Nick Maynard explained: “AI-powered ID solutions are uniquely suited to reducing the resources needed to verify identity, so by integrating the correct KYC tools into cloud-based systems, financial institutions can dramatically reduce their compliance burden.”

Juniper analysed various technologies in the RegTech sector based on metrics including anticipated timescale of impact, cost barriers and willingness to adopt new approaches, concluding that cloud computing is currently the most disruptive force in compliance.

The transition to cloud-based compliance is a crucial precursor to other RegTech approaches, such as AI or Big Data. Unless businesses effectively plan the correct cloud deployments, they will struggle to utilise the advanced technologies required to meet future compliance challenges, according to Juniper.

KPMG’s recent FinTech industry report stated that 2018 year-to-date funding has already exceeded total annual funding for RegTech in every year previous, except 2016, with the US and UK attracting the majority of this funding.

RegTech investment is still relatively immature though, according to KPMG, with approximately half of total funding raised by seed and early stage companies. “Over the next 12 to 24 months, we expect to see investment in RegTech to grow rapidly — particularly in areas like AI, KYC and know your data,” the report added.



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