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What are the top five future trends in RegTech for 2023?

In 2021, the RegTech industry reached a market cap of $7.9 billion and it is now predicted to grow to $23.76 billion in 2026.

To cast a spotlight on what’s in store for this fast-growing sector, the CFTE – Centre for Finance, Technology and Entrepreneurship recently hosted a special event.

Among the speakers, there was Know Your Customer‘s CEO & Co-Founder Claus Christensen, now also a senior lecturer on the CFTE’s RegTech Specialisation course.

Read about the five upcoming RegTech trends we have identified and watch the full recording of the webinar below.

Our Five Future Trends in RegTech


Widespread RegTech Adoption

We are currently witnessing a tidal wave of general RegTech adoption. All the efforts of various Regulators promoting RegTech use and the time and funds invested by RegTech providers are now paying off. The opportunities of RegTech for regulated verticals are finally fully accepted. At Know Your Customer, this has become even more evident in the course of the last 18 months. While in the past our solutions were mostly used by early adopters such as challenger banks and fintech companies, we are now seeing very traditional and established banks, law and real estate firms use our platform to bring the same level of automation and customer experience to their clientele as pioneered by the Fintechs and TechFin companies.


RegTech-Aware Regulations

Regulators globally have embraced RegTech in more ways than one. Most visible are the regulators that are actively promoting the use of RegTech, like for example the Hong Kong Monetary Authority (HKMA) with their RegTech 2025 Vision. These regulators realised that RegTech helps reduce the burden of regulations on both regulated institutions and their customers, hence lowering the pressure on regulators to keep rules light. However, there is an even more important trend happening right now. The new generation of regulations is no longer written as if to be implemented paper-based and manually. Instead, regulations assume more and more that RegTech is in use, enabling regulated institutions to implement more complex rules with real-time updates and more detailed regulatory reporting.


AI Maturity in RegTech

AI use in RegTech is now going beyond the buzzword phase. In the early days of AI in Regtech, the underlying assumption was that you could just replace human decisions with a machine learning model trained by a set of previously made human decisions. That simplistic approach can result in huge efficiency gains but at a price. For example, racial bias embedded in the training sets, training data security considerations, and,  most importantly, removing human accountability in an area where the financial institution’s accountability to the regulator is required by law. At the same time, AI as a technology is ubiquitous today and it has matured. We will see more use of machine learning in RegTech systems, but it will be more targeted to where it makes sense, where it is safe, and where vendors can ensure ethical AI implementations.


Market & Solution Consolidation

Not just the usage of RegTech is exploding, but also the number of vendors has grown considerably since the term “RegTech” was created only a few years ago. Smaller vendors are struggling to be heard above the noise and struggling to integrate with enough legacy systems to be truly useful for clients. Established larger vendors need to accelerate development or lose out against the faster smaller competitors. So, we expect more consolidation to come. The market will move away from point solutions that only solve one small problem and will also leave behind big monolithic solutions that are too inflexible. Providers with modular solutions that can be reconfigured to apply to many verticals will prevail and move up the value chain.


AML in the Metaverse

As the metaverse keeps gathering speed, the need for digital identity and KYC/KYB processes that are fit for purpose will become more pressing. In a globally connected metaverse, such areas become even more important than in a more fragmented financial system operating according to local and national regulations. The opportunities for abusing the metaverse’s potentially unlimited system of commerce are exponentially higher. And even more impressive are the opportunities for growth in many dimensions by connecting all of humanity in one fair and open system. Considering all of this, shouldn’t we establish a global financial regulator for the metaverse to get ahead of the upcoming changes?

Discover how to embrace RegTech innovation and drive business growth across borders with Know Your Customer.

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Last updated on March 21st, 2024 at 05:26 pm

Claus Christensen

Claus Christensen is the CEO & Co-Founder of Know Your Customer. His vast array of previous experiences includes founding a technology company that develops email server infrastructure products for 60,000+ global customers and serving as VP Electronics at Thielert Aircraft Engines. A regular contributor to leading industry publications and a recognised expert in the anti-money laundering and financial regulation space, Claus is also the host of the RegTalks podcast and a senior lecturer of the Centre for Finance, Technology and Entrepreneurship (CFTE)’s RegTech Course.