What is RegTech? The 7 essentials you need to know in 2023

Ever since the financial crisis of 2008 financial institutions are getting more and more concerned about regulation and compliance. With governments tightening the legislation on the financial products and services, organisations are forced to spend more money in order to comply and avoid fines and reputational damages. So it seems natural to ask: what is RegTech?

A survey conducted in 2019 highlighted that most global financial institutions are finding it increasingly challenging to comply with recent data privacy bills and regulations, such as GDPR and CCPA. Out of the institutions surveyed, 33% stated that their processes were too manual, while 25% said that they were too time-consuming. 

However, there is a new trend emerging that can alleviate the struggles organisations have, namely – RegTech. What is RegTech and why is everyone talking about it, you may ask? Well, that’s exactly why we’ve prepared this article—to answer all your questions about this new trend that will undoubtedly revolutionise compliance. Regtech is here to stay so you should start learning about it now.

1. So… What does RegTech actually stand for?

First and foremost, 2019’s buzzword of the year ‘RegTech’ stands for Regulatory Technology. What ‘RegTech’ does, in a nutshell, is that it leverages cutting-edge technology to provide nimble, secure and cost-effective regulatory solutions. 

2. What is Regtech?

Now that we have clarified what RegTech is short for, let’s move on to what RegTech as a concept aims to achieve.

In short, Regtech ensures that financial institutions are able to be more effective in reaching regulatory compliance. This is rapidly becoming an important concern, given that recent years have witnessed banks facing increasing pressure from regulatory bodies. In January 2018, the European Parliament’s MiFID implementation of MiFID II legislation resulted in complex implications that are required to be managed and executed by the compliance team. 

RegTech achieves this by leveraging cutting-edge technologies, for example, artificial intelligence (AI), big data, biometrics, cloud computing, machine learning (ML), data protection technologies and more. Process automation allows RegTech also to minimise the risk of human error as data management become more complex and detect suspicious activity.

3. What is an example of RegTech?

Among many other regtech companies, a good example of a well-recognised regulatory technology solution in banking is Comply Advatage that leverages smart technology and data science to build flexible AML compliance solutions. They are able to deal with the risk quickly given both national and international regulation. 

Other examples of regtech solutions include:

  • Onfido
  • Capnovum
  • Clausematch
  • Squirro
  • Duedill
  • Sybenetix
  • Apiax

4. Is RegTech the new FinTech?

It is easy to confuse RegTech with FinTech, also known as financial technology. However, Deloitte defines FinTech as the use of new technologies in the financial services industry to improve operational and customer engagement capabilities. On the other hand, RegTech – true its name – focuses solely on regulatory matters.

In fact, the UK’s Financial Conduct Authority (FCA) refers to RegTech as a subset of FinTech that focuses on technologies that may facilitate the delivery of regulatory requirements more efficiently and effectively than existing capabilities.

5. How can RegTech be used in banking?

Besides the example given above, the different ways that regulatory technology can be used in banking and the financial services sector include:

Regulatory reporting 

Enables data distribution and regulatory exposure through big data analytics, real-time reporting and cloud. For example, Suade helps banks submit regulatory reports without disruption to their architecture.

Identity Management & Control

Facilitates counterparty due diligence and Know Your Customer (KYC) procedures. Anti-Money Laundering (AML) and anti-fraud screening and detection. For example, ComplyAdvantage is an AI-driven risk management database for companies that can potentially be hurt by financial crime. The company’s proprietary AML data feed creates profiles, automates customer monitoring with KYC, due diligence tools and screens payments in real time.

Risk management

Detects compliance and regulatory risks, assesses risk exposure and anticipates future threats. For example, IdentityMind Global provides anti-fraud and risk management services for digital transactions by tracking payment entities.

Transaction Monitoring

Provides solutions for real-time transaction monitoring and auditing. Leverages the benefits of distributed ledger through Blockchain technology and cryptocurrency. For example, Chainalysis uses blockchain technology to stamp out as money laundering, fraud detection and compliance violations.


Real-time monitoring and tracking of the current state of compliance and upcoming regulations. For example, Ascent uses AI to find and house all applicable regulations that affect a company in real-time.

6. What are the benefits of using RegTech in banking?

As mentioned above, regulators are increasingly expecting banks and financial institutions to be more proactive than ever in detecting, preventing, and remediating compliance issues within their own operations. However, according to this survey, 75% of respondents state that their current processes and technology are hindering them from effectively managing regulatory change.

By leveraging RegTech in banking, organisations are able to:

  1. Streamline operational processes
  2. Conduct in-depth trade surveillance
  3. Integrate solutions quicker
  4. Mine data insights to recognise questionable patterns in real-time 

Additionally, asset managers in financial institutions can also utilise RegTech to effectively manage their firm’s risk and compliance programmes whilst simultaneously meeting regulatory demands throughout the organisation.  

Ultimately, by using RegTech to increase the efficiency of operational processes, employees are then able to channel the additional time and resources to focusing on organisational activities that focus instead on business development or improving the customer experience.

7. How important is RegTech in banking?

Having discussed the benefits of RegTech, as well as the ways that it can be leveraged within the financial services industry, the next topic to address is the magnitude of RegTech’s influence in banking. 

From 2014 to 2018, global RegTech investment grew almost five-fold, at the rate of 48.5% CAGR. Finding from 2014 to 2017 doubled, almost reaching $4.5bn in 2018. 

In terms of future spending trends, however, a report from Juniper Research estimates that the spending on RegTech will rise by an average of 48% per annum over the next five years, rising from $10.6 billion in 2017 to $76.3 billion in 2022. In fact, estimates suggest that, since 2017, tier-1 banks—JP Morgan, HSBC—have been spending well over $1 billion a year in regulatory controls and compliance.

Further, Bloomberg reports that, with the number of fraudulent activities recorded rising, there has been a consequent increased need and demand for regulatory technology.


The interesting thing about RegTech is that, while regulation is typically perceived as restrictive by financial institutions, RegTech should not be viewed as such. If anything, it has the potential to cut down bank expenditure on regulatory fines by large amounts. For bankers out there and individuals working in the financial sector, RegTech should be perceived as a helpful companion.

As a whole, the RegTech industry is poised to significantly impact the financial and compliance industry, as well as pivot the very nature of regulatory compliance. Even tech giants like Microsoft, Amazon, IBM and Google are starting to leverage their technical competence and regulatory compliance experience to launch their own automated compliance solutions. Now, that’s a future trend to watch.

Want to know more? Watch an introduction module of the upcoming CFTE RegTech course here.

Curious to know more? We’re currently curating our new online programme on RegTech with leading industry experts. Register here to be at the front-line of learning more about this.

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