Future Opportunities For Regtech In Emerging Markets

The tools and technologies are growing as financial services and institutions sectors are fast forwarding so the regulatory process does. Regtech providers are being forced to go ahead of the curve.

To continue with market integrity, compliance, and regulations firms must adopt Regtech solutions for detecting market abuse and risk assessment. But what solutions do Regtech technologies hold for emerging trends in the market?

At the end of 2024 major changes have been made in Regtech or regulatory technology due to industrial evolution in financial services. Due to digital transformation in financial institutions, Regtech has become an indispensable tool.

The market is continuously growing, the global sales of Regtech are estimated to hit a market value of nearly $13 billion in 2023 and are estimated to reach a value of almost $82 billion by 2033.

Financial institutions use Regtech to address top governance issues they face in transparency, accountability, and regulatory compliance. With the evolution of global regulations, firms must ensure governance structures to meet new standards.

Regtech solutions help governance processes for real-time monitoring, enhanced reporting capabilities, and tools to check and automate compliance.

Trends in RegTech

Use of AI automation

Companies are now using AI and machine learning to comply with rules, laws, and regulations.

The shift of Artificial intelligence in many companies reduces the workload of human resources and enhances the efficiency of work by minimizing errors and allowing organizations to respond quickly to regulatory changes.

Proactive Risk Assessment

Regulatory changes happen with challenges from time to time and there is a growing emphasis on mitigating the proactive compliance strategies to deal with rather than reacting to them.

This approach helps organizations and firms maintain a culture of compliance and reduces the chances of getting fined.

Compliance solutions across borders

Businesses are connected globally, and diverse regulatory requirements are increasing.

Regtech firms are developing tools and strategies to facilitate compliance with international regulations.

Regtech Market segments

The segments of RegTech are based on the Business or organizational deploying model, Firm size, applications, and end users. Based on these Market is divided into services and solutions.

The deployment model is divided into one premise and cloud and by application, it is divided into anti-money laundering (AML), fraud management, regulatory management, Risk assessment, compliance management, regulatory reports, and Identity verification.

End users are segmented into

Banks
Insurance companies
IT and Telecom
Public sectors
Energy and utilities and others

Region-wise analysis shows the division across North America, Europe, Asia-Pacific, and LAMEA.

Market Landscape and Trends

The major Regtech market trend is the rise of regulatory complexities in different industries and firms that drive institutions and organizations to look for new ways to manage compliance.

The use of Artificial and machine learning has improved the predictive and proactive risk assessment capabilities and compliance with measures.

Furthermore, the rise of digital identity verification and biometric technologies is transforming the know-your-customer (KYC) processes and providing secure customer onboarding.

The shift towards a collaborative regulatory environment with regulators and business collaborations develops flexible and responsive frameworks. The scalability and flexibility of cloud-based computing solutions are becoming more popular and allow firms to place RegTech solutions efficiently.

Top contributing Factors

Adoption of Advance Technologies

RegTech has become the fastest adopter of technologies such as cloud technology, Application programming interfaces (APIs), data analytics, robotic process automation (RPA), Artificial intelligence and machine learning, blockchain, and chatbots.

Regtech is improving the quality of reported data across different regions with the growth of changing country regulatory and Government policies.

Regulatory bodies are implementing advanced technologies and providing integrated value-added services as the demand for associated digital processes of regulations increases.

RegTech solutions use AI technology to process and analyze huge amounts of regulatory data by reducing human resources and manual processes of data management.

The adoption of technologies and implementation of these technologies reduce costs with security maintenance while providing efficient and convenient services causing the RegTech market demand.

Collaboration Of National Regulators & Financial Institutions

Regulatory bodies across the Asia Pacific, the U.S., and European regions are constantly looking toward collaboration with the financial technology industry globally.

The increase in the Fintech community and regulators’ contribution is a win-win for governments and businesses.

For instance, the Global Finance Innovation Network (GFIN) is an international network of financial regulators and organizations that support financial innovations was launched in January 2019. Additionally, GFIN helps to provide firms and new business models with effective solutions for more than one jurisdiction.

The increased collaboration between national regulators and financial institutions pushes the RegTech market growth.

Diverse and Conflicting Laws in Different Regions

Different laws set different standards and regulations for different jurisdictions, with an increasingly unified approach by different financial institutions for regulations.

This is a crucial factor for RegTech companies to explain the solutions for multiple regulations such as MIFID II, GDPR, and others which bring international conflict for market growth.

Developing solutions that can make room for the complexities of manifold regulatory systems raises the costs for RegTech firms with differences in data formats, reporting standards and legal documentation can be cost-effective and difficult.

The development costs in diverse and conflicting regulations and laws hamper the RegTech industry.

Increased General Data Protection Regulation (GDPR) Concerns

RegTech solutions disrupt the regulatory landscape with technologically advanced solutions within the financial industry.

The General Data Protection Regulation (GDPR) guidelines become a binding application over the consumer’s data.

It governs the use of personal data and introduces a right for individuals to object to profiling, which is expected to create lucrative opportunities for the market to gain trust & build service loyalty in the market.

RegTech solutions that provide encryption, secure data storage, and compliance checks can assist organizations in navigating these cross-border data transmission problems.

With GDPR requirements, the solution providers have an opportunity to improvise technology implications by taking the GDPR into account, which is expected to boost the RegTech market opportunities in the upcoming years.

Final Words

The future opportunities for Regtech in emerging technologies are shaped by the advances in data processing, AI, and digitalization of financial institutions.

While these trends present exciting opportunities for improving market surveillance, they also introduce new risks that must be carefully managed.

Market players are adopting various strategies to enhance their services in the market and improve customer satisfaction.

As the industry continues to grow and evolve, RegTech will play an increasingly important role in maintaining the integrity of global financial marketers and institutions.