The Future of Regulatory Technology (RegTech): How Automation and AI Are Revolutionizing Compliance Efforts


RegTech, powered by AI and automation, is more than just a passing trend. Its market presence is growing each year and it is set to account for a significant portion of all regulatory spending.

In just a decade, regulatory technology has journeyed from being a relatively unknown concept to becoming indispensable in every organization’s regulatory and compliance toolkit. As we look ahead, we’re left wondering: Which breakthroughs in this field will truly leave a lasting impact? According to Future Market Insights, the global RegTech market, valued at US$ 7.9 billion in 2022, is expected to surge at a CAGR of 17%, reaching a staggering US$45.8 billion by 2032. With its market presence growing each year, there’s no denying that the RegTech sector is on an upward trajectory.

The advent of new AI technologies prompts compliance professionals to reassess their current operational models and risk management strategies. As such, regulators and business leaders are tasked with weighing AI’s practical benefits and risks as they oversee its adoption. In this article, we will explore the future of Regulatory Technology (Regtech), where automation and AI are revolutionizing compliance efforts like never before.

Understanding RegTech

Regulatory Technology, or RegTech, is a powerful tool that’s reshaping the landscape of regulatory compliance, and it’s set to play a pivotal role in the future of business operations. RegTech is not just another buzzword; it’s a transformative force revolutionizing compliance with AI and automation. It’s a new breed of technology designed to tackle the complex challenges of regulatory compliance in an increasingly data-dense world.

Unlike FinTech, which focuses on delivering financial services through technology, RegTech is all about harnessing the power of cutting-edge tech to meet regulatory requirements more effectively and efficiently.

Significance of RegTech

In the face of escalating compliance costs and hefty fines, the financial sector increasingly turns to RegTech for solutions. According to a report by KPMG International, financial institutions are spending an astounding US$780 billion annually on compliance.

Since 2008, banks have paid more than US$300 billion in fines, as reported by Bloomberg. In this rapidly evolving landscape, innovation is key. Aistemos says that the most prolific tech company currently holds 23,864 FinTech patents.

Looking ahead, the influence of RegTech is set to grow even more. Juniper Research predicted that by 2022, RegTech would account for 34% of all regulatory spending, a significant leap from just 4.8% in 2017.

These figures underscore the pivotal role that RegTech, powered by automation and AI, is playing in revolutionizing compliance efforts. As we move into the future, this trend will only intensify.

See also: The Rise of RegTech and Its Future in the Age of Big Data

Empowering Businesses through RegTech

The rise of RegTech is a response to the growing complexity of regulations and reporting requirements in various industries. For business decision-makers and C-level executives, understanding the importance of RegTech is crucial. It’s not just about compliance; it’s about leveraging technology to gain a competitive edge. AI in compliance efforts, for instance, can provide unprecedented insights into regulatory trends and risks, enabling businesses to make informed decisions and stay ahead of the curve.

The impact of AI on regulatory technology is profound. It’s not just automating routine tasks; it’s transforming how businesses approach compliance. From predictive analytics to machine learning, AI enables companies to anticipate regulatory changes, identify potential risks, and implement proactive compliance strategies.

RegTech is also driving standardization and transparency in the market. It’s creating a level playing field where market participants and regulators can interact more effectively. This increased transparency is beneficial for regulators and businesses as it fosters trust and confidence in the market.

Regulatory Outlook

The potential benefits and drawbacks of AI for society and the economy are still unfolding, and the same can be said for the regulatory frameworks that will oversee its implementation. The recent experience with digital asset regulation serves as a case study, demonstrating that regulators often adopt a ‘wait-and-see’ stance towards emerging technologies.

Typically, regulatory guidance needs to catch up to innovation by a few years. While it’s challenging to foresee the exact contours of future regulations, there are several key themes related to AI that financial regulators will inevitably need to address.

Embracing AI: A Measured Approach

AI is widely adopted across risk and compliance sectors, with its applications already embedded in numerous use cases. However, this widespread adoption is characterized by caution, with fast followers leading the charge rather than trailblazing innovators.

Far from being perceived as an ‘exotic’ or ‘alien’ technology in the business world, AI is increasingly seen as a standard component of the analytical toolkit. Many quantitative analysts, typically well-versed in analytical tools, adopt a hybrid approach. They supplement their standard statistical tools with AI techniques, especially when dealing with high-dimensional problems or multivariable contexts.

Many analysts are also becoming familiar with toolkits and ecosystems, such as the Python ecosystem, enabling them to incorporate advanced data management capabilities into their core analytics swiftly. However, these new tools may pose organizational challenges that are significantly larger and more complex than the spreadsheet environments that many financial institutions are accustomed to.

Forecasting the Future Tech In Regulatory Compliance

The RegTech industry is poised for significant growth and transformation in response to increasingly complex and demanding regulatory requirements. Here are a few key trends that are set to shape the future of this dynamic sector:

Seamless Integration with Business Operations As RegTech solutions evolve and mature, they are expected to become more deeply integrated with core business operations. This means that compliance will transition from being a separate, isolated function to a seamless and integral component of the business process.

The Rising Role of Data Analytics As companies strive to leverage data to identify risks and enhance compliance processes, data analytics will take center stage in the RegTech realm. This will necessitate a heightened focus on data quality and management and the development of more advanced data analytics tools.

The Power of Partnership As businesses seek more holistic and integrated compliance solutions, collaboration and partnerships will become increasingly critical in the RegTech landscape. This trend underscores the growing need for comprehensive solutions addressing regulatory compliance’s multifaceted nature.


It’s clear that RegTech, powered by AI and automation, is more than just a passing trend. With its market presence growing each year and its influence set to account for a significant portion of all regulatory spending, the RegTech sector is undoubtedly on an upward trajectory.

So, whether you’re a business leader, a compliance professional, or a C-level executive, it’s time to embrace the RegTech revolution. After all, the future of regulatory compliance is here, and it’s being shaped by automation and AI.

Farnoush Mirmoeini

About Farnoush Mirmoeini

Farnoush Mirmoeini is one of the co-founders of KYC Hub, where she leads product management, AI/data science, and growth strategy. She has over ten years of experience in AI, quantitative financial, and risk modeling and has published several papers on AI applications. Prior to KYC Hub, Farnoush worked at several start-ups, moving to HSBC, where she led the development of new models for inflation swaps. Her effort went beyond her team and involved senior risk leaders as she generated buy-in and inspired a wider effort within the organization.

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