International RegTech Companies Defining the $100-Billion-Dollar Industry

Demand for a better solution

Dealing with regulations and compliance has always been a costly and far-from-hassle-free experience for companies, especially for young startups in the financial services industry. Regulatory documents are 100+ page pamphlets requiring special skill and experience to comprehend and deal with. An example of skyrocketing expense that compliance requires is a $2.2 billion spent by London-based HSBC on regulation and compliance in the first nine months of 2015, up 33% YoY. Financial institutions’ expenses on compliance have increased as a percentage of total expenditure over time. Globally, ~$80 billion is spent on governance, risk and compliance, and the market is only expected to grow, reaching $120 billion in the next five years.

If compliance seems expensive, non-compliance will just knock out the common sense. Financial institutions in the US alone have paid more than $160 billion in fines for non-compliance. The main point is, the financial services industry is in a need for more cost-effective solutions in regulatory and compliance matter without the need to sacrifice the quality. The modification of FinTech has emerged in recent years to address the need and brought bright entrepreneurs into RegTech – a set of companies and solutions that address regulatory challenges across industries, including financial services, through innovative technology.

The industry is poised to succeed as the global demand for regulatory, compliance and governance software is expected to reach $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 APAC when it comes to spending in regulatory software over the next five years. At present, close to 35% of the software spending happens in APAC. Investments in regulatory software can lead to an ROI of 600% plus with a payback period of fewer than three years; yet, most financial services firms have not subscribed well to RegTech solutions.

RegTech companies to look out for in 2016

From our previous overview in December 2015 (and our report), there has been a significant exploration of the RegTech industry and a range of financial services industry professionals have been keeping track of the most interesting RegTech companies look out for in 2016 and beyond. Refreshing the overview, we put together a graph of the RegTech companies (by segment) that have been on the radar of the industry professionals and have been listed as interesting RegTech companies to look out for in 2016.

Here are the descriptions of some of the companies represented on the graph above:

AlgoDynamix is an innovative risk analytics company that detects disruptive events in global financial markets and anticipates price movements hours or days in advance of the event.

AQMetrics offers integrated regulatory risk and compliance management solutions.

CheckRecipient automatically predicts and prevents misaddressed emails from being accidentally sent to the wrong recipient.

Corlytics provides compliance risk analysis for financial institutions.

FundApps wraps regulatory information in a cloud-based managed compliance service for asset managers, hedge funds and institutional investors.

Funds Reconciliation Software develops cloud-based reconciliation software for the funds industry, replacing prehistoric enterprise software with SaaS.

IdentityMind Global is an on-demand platform that provides next-generation risk management and anti-fraud services for the e-commerce ecosystem.

KYC Exchange is setting the standard as the first secure communication platform for KYC and customer due diligence (CDD) purposes for the financial industry.

OSIS offers an alternative way for banks and investors to analyze credit risk by coherently combining a statistical analysis of data with subjective opinions about forward-looking risk distributions. Such analysis captures parameter uncertainty and allows for designing more coherent stress-testing scenarios.

Passfort automates KYC compliance and customer data storage to protect and enable growing regulated businesses online.

Percentile builds technology to service the needs of risk management at a global financial institution.

Quarule offers risk controls and compliance certification technology for coordinating governance, automating oversight and retaining and reusing knowledge.

Silverfinch connects asset managers and insurers through a fund data utility in a secure and controlled environment.

Suade designs technology specifically around regulatory concerns. Suade’s solutions enable banks to achieve continuous compliance, manage their costs and easily conduct analyses.

Sysnet Global Solutions is a leading international provider of information security assurance and compliance validation services.

TradeFlow is a trade data tracking and risk alert-based technology.

Tradle uses blockchain to bridge internal and external financial networks to achieve user-controlled KYC portability.

Trulioo is a global leader in identity verification. It provides instant electronic identity and address verification for over 4 billion people in 40+ countries.

Trunomi solves KYC and unlocks new revenues and efficiencies with technology to easily create and securely manage the consent to use customers’ personal data.

Trustev provides online fraud prevention solutions that scan transactions in real time to determine whether they are real or not.

Vizor provides software that enables the supervision of companies by a supervisory authority (central bank, financial regulator or tax authority).