The global RegTech market size was valued at USD 2.87 billion in 2018 and is expected to grow at a compound annual growth rate (CAGR) of 52.8% from 2019 to 2025. High compliance costs and growing demand for regulatory intelligence are expected to contribute to the adoption of regulatory technology (RegTech) over the next six years. RegTech is a sub-class of FinTech and has gained prominence since 2015. Rising penalties for non-compliance with regulations are anticipated to further fuel the growth. RegTech solutions with real-time compliance analysis help connect regulators and businesses while protecting the interests of consumers.
The Institute of International Finance has defined RegTech as the use of new technologies to meet compliance and regulatory requirements more efficiently. RegTech involves the use of tools to enhance the stringency of regulations and minimize the compliance risks associated with the business. According to a study of the World Bank, a robust regulatory framework can help boost GDP growth by more than 2% annually. In addition to the rising demand for risk management, the additional costs of managing compliance procedures and increasing demand for regulating business processes are expected to drive the regulatory technology market growth over the forecast period.
The compliance costs incurred in financial institutions have increased drastically over the past few years. A reduction in these costs and compliance failures enables enhancements in business processes, in terms of improved response times, and helps increase Return on Investment (ROI). The governments across the world are encouraging the adoption of RegTech by making Know Your Customer (KYC) document a mandatory requirement for opening bank accounts and financial transactions. KYC obliges financial institutions to identify their customers’ details such as name, address, nationality, birth date, and so on. The adoption of identity control and management solutions has increased owing to the implementation of the KYC process and is expected to have a positive impact on the financial industry by avoiding fraudulent activities.
Automation, Artificial Intelligence (AI), and machine learning technologies are used in most RegTech solutions. Artificial intelligence is one of the key technologies influencing RegTech market growth. It has enabled developments in RegTech solutions for better identification of frauds. It can be used for multiple data sets in assorted data sources such as social media to deliver rapid results for detecting fraudulent activities. Innovations that include the deployment of AI are expected to continue to reduce the cost of compliance. Moreover, artificial intelligence is expected to help RegTech companies in improving transparency and compliance in financial institutions and help provide security against fraudulent activities.
The factors considered while choosing an appropriate RegTech solution are finding a solution for appropriate AI usability, prioritizing solutions that perform targeted compliance, and avoiding buying AI tools for simplifying data. RegTech also helps in setting business objectives in congruence with values and risks and in achieving the set goals while eliminating the risks associated with business processes.
Large enterprises accounted for the highest regulatory technology market share in 2018 owing to the growing adoption of risk and compliance management solutions in large enterprises from different industry verticals. Consultation service providers such as IBM, Deloitte, Thomson Reuters, and PwC help large enterprises realize the benefits of efficiently managing their business functions.
Increasing demand for RegTech applications has encouraged large enterprises such as IBM and Deloitte to implement a robust regulatory framework. Furthermore, the use of robotics for process automation, workflow automation, and advanced analytics are expected to enable digitalization of the compliance and risk management functions.
The Small and Medium Enterprises (SMEs) segment is also expected to expand at the highest CAGR of 59.3% over the forecast period owing to the growing demand for identity and control management and risk and compliance management solutions.
The risk and compliance management segment accounted for the largest regulatory technology market share and was valued at USD 833.6 million in 2018. The growth can be attributed to the high adoption in the U.S. and the U.K. and the growing need to manage complex processes in the banking sector for ensuring better execution of compliance management. Increasing stringency of regulations regarding risk management and compliance, fraud management, and identity management are further driving the growth.
The assimilation of RegTech solutions within the existing technology platforms is expected to improve compliance functionality. This is expected to help financial institutions improve operational efficiency, agility, and financial transparency and reduce the overall cost of compliance. A large number of companies in the U.S. and U.K. are focusing on reducing compliance costs by enabling innovation to transform the landscape of regulatory compliance.
The regulatory intelligence segment is anticipated to expand at the highest CAGR over the forecast period owing to the growing adoption across banking, financial services, and insurance sectors, among others. Regulatory Intelligence helps in monitoring, gathering, and analyzing regulatory data and tracking down developments in a rapidly changing environment. A regulatory intelligence process enables flexible research analysis while monitoring the regulatory environment and ensuring compliance.
North America is expected to account for the largest market share over the forecast period. The goal of minimizing the number of fraudulent activities is contributing to the regional demand for complying with the increasing number of stringent regulations. The growing list of regulatory requirements in the financial sector is one of the major factors driving regional growth. For instance, the U.S. House Committee on Financial Services demonstrated the Dodd-Frank Act to be 2,300-pages long. Concerns regarding the satisfactory implementation of such long regulatory requirements are some of the major factors driving the market.
Increasing compliance issues is another critical factor driving the market growth in North America. The U.S. has a strong inclination toward the risk and compliance management and automation of regulatory processes. Companies based in the U.S., such as IBM, Deloitte, and Broadridge Financial Solutions, are focussed on offering different RegTech solutions to help enhance business processes and to automate the same. In 2018, the U.S. held a significant market share owing to the increasing investment deals.
The key players are expanding their product portfolios overseas for strengthening their market foothold.
In May 2018, Broadridge completed the acquisition of FundAssist Limited, a sales and marketing solutions and regulatory communication service provider. FundAssist provides a suite of capabilities that enable the management, composition, and distribution of digitized regulatory and disclosure documents. The addition of FundAssist is expected to further improve the existing governance and communications business competencies of Broadridge in the fund market in Europe.
In June 2017, IBM launched a suite of cognitive solutions based on IBM’s Watson Financial Services and aims to help financial professionals manage fiduciary and regulatory responsibilities. The solution assimilates big data technology with the applications of Algo One. This enables financial firms to determine risks in minimal time using an instinctive UI. The company is further integrating the RegTech solutions into Watson to help banks deal with an increasingly complex regulatory and risk environment.
Some of the prominent players in there tech market include:
London Stock Exchange Group plc
Broadridge Financial Solutions Inc.
RIMES TECHNOLOGIES CORPORATION
Infrasoft Technologies Ltd.
Deloitte Touche Tohmatsu Limited
The market size value in 2020
USD 6.5 billion
The revenue forecast in 2025
USD 55.2 billion
CAGR of 52.8% from 2019 to 2025
The base year for estimation
2015 - 2017
2019 - 2025
Revenue in USD million and CAGR from 2019 to 2025
Revenue forecast, company ranking, competitive landscape, growth factors, and trends
Organization size, application, region
North America; Europe; Asia Pacific; Latin America; Middle East & Africa
U.S.; Canada; Germany; U.K.; France; China; India; Japan; Brazil; Mexico; Saudi Arabia; UAE; Africa
Key companies profiled
NICE Actimize; PwC; IBM; London Stock Exchange Group plc; BWise; Broadridge Financial Solutions Inc.; Accuity; RIMES TECHNOLOGIES CORPORATION; Wolters Kluwer; Compendor; Infrasoft Technologies Ltd.; Deloitte Touche Tohmatsu Limited
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This report forecasts revenue growth at global, regional, and country levels and provides an analysis of the latest industry trends in each of the sub-segments from 2015 to 2025. For this study, Grand View Research has segmented the global RegTech market report based on organization size, application, and region:
Organization Size Outlook (Revenue, USD Million, 2015 - 2025)
Application Outlook (Revenue, USD Million, 2015 - 2025)
Risk & Compliance Management
Regional Outlook (Revenue, USD Million, 2015 - 2025)
Middle East & Africa
b. The global regtech market size was estimated at USD 4.3 billion in 2019 and is expected to reach USD 6.5 billion in 2020.
b. The global regtech market is expected to grow at a compound annual growth rate of 52.8% from 2019 to 2025 to reach USD 55.2 billion by 2025.
b. North America dominated the regtech market with a share of 54.3% in 2019. This is attributable to reduced compliance costs and improved business experience.
b. Some key players operating in the regtech market include IBM, PwC, Accuity, Wise, and Wolters Kluwer.
b. Key factors that are driving the market growth include factors such as regulatory sandbox approach is helping RegTech companies substantiate their claims to regulatory compliance in a safe and controlled environment.
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