The leading knowledge platform for the financial technology industry
The leading knowledge platform for the financial technology industry

A-Team Insight Blogs

Global RegTech Industry Tops $5bn, But More Collaboration is Needed

The global RegTech industry generated an estimated $5 billion in revenue last year, as regulatory changes and technological advancements drove a surge of new startups in the past five years – according to a new Global RegTech Industry Benchmarking Report released this week by the Cambridge Centre for Alternative Finance (CCAF).

Sponsored by EY Japan (with field research supported by the International RegTech Association and the Australia-based RegTech Association), the study found that as of 2018, RegTech firms employed an estimated 44,000 people globally, having raised about $9.7 billion in external funding to date. About 60% of all RegTech vendors in the CCAF research sample were founded between 2014 and 2018, while 82% had their first funding round during this period.

Unsurprisingly, the report found that the industry is already highly international, with fewer than one-third of RegTech vendors active in just one market and over a third present in five or more jurisdictions. Nearly two-thirds of vendors had a physical presence or significant market share in the UK, and nearly half have the same in the US.  There is also significant activity in Australia, Canada, Singapore, Hong Kong, Japan, Luxembourg, Switzerland, Ireland, Germany and France.

At the core of the industry lie a few key technologies – including the cloud, natural language processing, machine learning, and big data analytics. Notably, the survey also found that data demands drive innovation – with RegTech solutions most strongly in demand from firms that have to report large volumes of data to standard formats for supervisory purposes, or those that face substantial fines or criminal sanctions as a result of non-compliance with specific regulations.

Profiling is the largest segment of the market by funds raised to date, followed by due diligence and dynamic compliance. The largest share of turnover was claimed by firms in the reporting and dashboards and risk analytics segment.

However, challenges still face the industry – including long sales cycles, complex IT planning within client institutions, difficulties in establishing trust, and high levels of competition – which have left some vendors struggling to gain traction.

A handful of larger vendors have so far dominated most funding and commercial activity; but half of those surveyed in the report had raised less than $1.6 million; while over a quarter had received no formal external funding. A solution to this could be a move towards partnerships, co-creation with clients and collaboration with other start-ups, suggested CCAF.

“The findings point to a rapidly growing and technology-enabled global industry serving an increasingly diversified customer base, yet still working to establish trust and credibility as it matures,” says Bryan Zhang, CCAF Executive Director.

“A variety of key players, including regulated companies, regulators, technology start-ups, and research institutions, can contribute to each other and mutually benefit, and further drive innovation in the entire society,” adds Keiko Ogawa, Partner and Regtech Leader at EY Japan.

Related content

WEBINAR

Recorded Webinar: Improving data integrity to address regulatory requirements

Financial institutions today face a global regulatory landscape characterised by rigorous and varied reporting requirements across their businesses. Reporting challenges include completing more data fields across more lines of business with greater frequency, adding complexity and cost. At the same time, there is waning tolerance among supervisory bodies for errors, issues or delays – as...

BLOG

ComplyAdvantage Tops Up Series C Funding with Goldman Sachs Investment

ComplyAdvantage, a financial crime compliance specialist, has received new investment from Goldman Sachs Growth Equity. The investment will be used to build on the company’s rapid growth and cement its position as a critical part of the value chain for companies managing evolving risks around anti-money laundering (AML) and know your customer (KYC) processes, as...

EVENT

RegTech Summit APAC Virtual

RegTech Summit APAC will explore the current regulatory environment in Asia Pacific, the impact of COVID on the RegTech industry and the extent to which the pandemic has acted a catalyst for RegTech adoption in financial markets.

GUIDE

Entity Data Management Handbook – Seventh Edition

Sourcing entity data and ensuring efficient and effective entity data management is a challenge for many financial institutions as volumes of data rise, more regulations require entity data in reporting, and the fight again financial crime is escalated by bad actors using increasingly sophisticated techniques to attack processes and systems. That said, based on best...