A new study from Juniper Research has found that spending on Regtech platforms will exceed $115 billion by 2023, up from an estimated $18 billion in 2018. The research found that increased regulatory pressures, as demonstrated by the recent GDPR (General Data Protection Regulation) implementation, are driving businesses towards Regtech to meet greater compliance challenges.
According to the research, any heavily regulated business sector not prioritising Regtech adoption would risk damaging fines from failing to keep pace with regulatory changes.
The report also highlighted that the sharp increase in Regtech spending (an average of 45% per annum between 2018 and 2023) was far higher than that for compliance spend as a whole (17%), reflecting the rapid migration of spend to Regtech from traditional methods.
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KYC (Know Your Customer) Checks Ripe for AI Disruption
The research, Regtech: Cost Savings, Technological Impact & Vendor Analysis 2018-2023, found that KYC checks for anti-money laundering are ripe for disruption by AI systems, due to the inefficiency of traditional, paper-based systems.
Juniper forecasts that across banking and property sales, annual gross cost savings from AI introduction for KYC will exceed $700 million by 2023, a nine-fold increase over 2018.
Research author Nick Maynard explained: “AI-powered ID solutions are uniquely suited to reducing the resources needed to verify identity. By integrating the correct KYC tools into cloud-based systems, financial institutions can dramatically reduce their compliance burden.”
Cloud Heavily Impacting Compliance
Juniper analysed various technologies in the Regtech sector based on metrics including anticipated timescale of impact, cost barriers and willingness to adopt new approaches and concluded that cloud computing is currently the most disruptive force in compliance.
The transition to cloud-based compliance is a crucial precursor to other Regtech approaches, such as AI or Big Data. Unless businesses effectively plan the correct cloud deployments, they will struggle to utilise the advanced technologies required to meet future compliance challenges.