A Report on Global RegTech: A $100-Billion Opportunity - Market Overview, Analysis of Incumbents and Startups

After the recession, banks in the US alone have shelled out more than $160 billion as fines, penalties and settlements for non-compliance of regulations. The London-based HSBC Bank spent $2.2 billion on regulation and compliance in the first nine months of 2015, up 33% year on year. The annual spending by financial institutions on compliance is estimated to be in excess of US $70 billion, thereby providing a very large opportunity for RegTech firms. Unlike the incumbents, RegTech solutions are agile while those developed by traditional players are robust. According to a survey by financial brand, risk management, regulatory and governance is the third most important priority for financial institutions globally, post investment in digital channels and product innovation.

The global demand for regulatory, compliance and governance software is expected to reach USD 118.7 billion by 2020. It is expected that close to 55% of the spending will occur in the consulting and business services. North America is expected to overtake Europe and Asia-Pacific when it comes to spending in regulatory software over the next five years. At present, close to 35% of the software spending happens in Asia-Pacific. Investments in regulatory software can lead to an ROI of 600% plus with a payback period of less than three years; yet, most financial services firms have not subscribed well to RegTech solutions.

RegTech firms currently operating in the market play multiple roles such as content aggregators and providers, where each and every regulation is understood by an expert, then decoded and laid out as simple rules. These firms provide access to simpler regulations through software as a service. Firms also support their clients in developing reports as per the jurisdiction's requirement, thereby saving a lot of time and money where firms otherwise spend on regulatory experts.

RegTech firms are cost-effective primarily because they use existing systems and information to come up with regulatory data and don’t aim at replacing the legacy systems of financial institutions. In fact, a sizeable number of RegTech firms has taken the partnership route for growth. Also, a correlation exists between the number of partnerships and the amount of funding raised by a RegTech startup. Startup IdentityMind has struck 18 partnerships since its inception. Likewise, firms such as Silverfinch, Passfort, and Trulioo have partnered with four, five and five firms respectively. It is also interesting to see that RegTech firms have also partnered with traditional GRC solution providers in the market. At least five such partnerships are quite well-known in the industry.

Let’s Talk Payments has come with a report on global RegTech which covers the following key topics:

  1. Financial Regulations, Risk & Compliance Overview
    1. Introduction to RegTech and the Need for it
    2. Major Financial Regulations in Different Geographies, Impact & Drivers
  2. Regulation, Risk & Compliance Market Potential
    1. RegTech Market Potential
    2. RegTech Market Growth Prospects (2015 to 2020)
    3. RegTech Market Potential by Regions (North America, South America, Asia, Europe, MENA)
    4. RegTech Market Potential by Financial Institutions Tiers
    5. RegTech Market Potential by Type of Expenditure
    6. Key Reasons for Financial Institutions to spend on GRC Software
    7. Estimated ROI: Investing in Regulatory Software
  3. Incumbent Players Analysis
    1. Incumbent Vendors in Compliance Technology (GRC): Market and Product Comparison
  4. Innovators (RegTech Solution providers)
    1. Why is RegTech Important?
    2. Startups and Their Solutions: Technology Used, Customer Segment
    3. Comparison of Key RegTech Innovators (Investments, Partnerships)
    4. How Are RegTechs Different From the Incumbents?