Regulatory technology investment is set to explode over the next few years, with spending forecast to jump six-fold by 2023 as firms encounter a growing number of compliancy challenges.
That is according to a new report from Juniper Research, which predicts that spending on RegTech platforms will increase from an estimated $18bn (£14bn) this year to $115bn by 2023.
Investment is forecast to rise by an average of 45% per annum over the next five years, far higher than the 17% spent on compliance as a whole, reflecting a rapid shift away from traditional compliance methods.
It is estimated that RegTech will account for 40% of businesses total compliance spending by 2023.
The findings come as businesses start adhering to General data Protection Regulation (GDPR), which came into force earlier this year and could hit firms with fines worth 4% of their global annual turnover.
"Any heavily regulated business sector not prioritising RegTech adoption would risk damaging fines from failing to keep pace with regulatory changes," Juniper warned.
After assessing various technologies for anticipated timescale of impact and costs barriers, Juniper concluded that cloud computing is currently the most disruptive force in the RegTech sector.
The latest report argues that transitioning to cloud-based compliance is a "crucial precursor" to other regulatory technology approaches, such as artificial intelligence and big data.
"Unless businesses effectively plan the correct cloud deployments, they will struggle to utilise the advanced technologies required to meet future compliance challenges," Juniper said.
This comes after Claranet UK found that more than half of the UK's financial sector is currently struggling to understand and act on the customer data they collect.
Legacy systems are thought to be one of the main reasons behind the findings, with cloud technologies suggested as a way of remedying the situation.
"Cloud technologies can help a great deal, providing the tooling and infrastructure needed to collect, process, and analyse vast sets of data from across the organisation and make it actionable in real time," Claranet UK head of vertical markets, John ayes-Warren, said.