Global investment in regulatory technology – or RegTech – is set for a three-fold increase over the next four years, according to forecasts by Juniper Research.
In a new report, the market research firm explains how RegTech spending is likely to increase from $68bn (£52bn) this year, to $204bn by 2026, accounting for over 50% of all regulatory compliance spend for the first time.
Outsourcing services such as digital onboarding – the process that prevents customers from needing to go to an office or store – is expected to be key to realising this future market growth.
This will accelerate artificial intelligence (AI) automation for online document verification and know-your-customer processes, helping financial institutions meet rising client expectations while reducing compliance costs.
According to the research, 26% of digital onboarding processes in the banking market will use AI systems by 2026, compared to just 8% in 2022.
Beyond digital onboarding, the report suggests that RegTech will swiftly expand to be used for more comprehensive tasks, including fraud detection and mitigation.
“Whilst the current benefits of AI are clear to RegTech vendors, the immediate focus must be on ensuring the algorithms are fed the most relevant data to maximise their efficiency in verifying digital identities and future use cases,” said research author, Harshada Thok.
“In turn, this will provide a differentiation point for RegTech vendors in an increasingly competitive market.”
Emerging areas where RegTech will be expected to provide verification services include cryptocurrency exchanges, digital healthcare and online gambling.
Impending changes to regulations in these markets is expected to provide significant opportunities for RegTech vendors to broaden their focus beyond financial markets.
Image credit: iStock
Author: Chris Seekings