Regtech 2025 – A Sector Set to Explode

The ever-evolving tech space, and particularly the movement we’re seeing in the generative AI ecosystem, has led to a digital arms race between those seeking to use tech for good in financial services, and those looking to harness tech for criminal purposes. Businesses and consumers are more at risk than ever before from fraud, which is one of the myriad reasons I believe regtech will be a huge fintech investment sub-sector in the short to medium term.

Let’s take a closer look at why this sector is thriving, and why it’s only set to get more attention… 

Why regtech? 

To understand why regtech is on the brink of explosive growth, let’s first take a look at its evolution. 

Traditionally, regulatory compliance has been a burden, requiring companies to navigate a complex web of rules and regulations, often across multiple jurisdictions. This has historically taken a lot of time – and a lot of money. 

Up until relatively recently, regtech solutions were often niche, targeting specific challenges in siloed industries. However, as the regulatory environment grows increasingly complex and global, the need for more comprehensive and integrated regtech platforms has become more apparent. 

Key growth drivers

There are several compelling factors that will drive regtech’s rapid expansion over the next few years:

Rising Regulatory Complexity

  • Anti-money laundering (AML), know-your-customer (KYC) regulations, data privacy laws like GDPR, or even ESG (Environmental, Social, and Governance) reporting, the global landscape is rapidly shifting, leaving many businesses feeling like they’re always trying to hit a moving target. This constant evolution is forcing companies to invest in regtech solutions that can keep pace with ever-changing requirements in a way that they simply can’t internally. 

Increasing Demand for Automation

  • Manual compliance checks are time-consuming and prone to human error. Regtech companies are leveraging AI and ML to automate routine compliance tasks such as transaction monitoring, reporting, and auditing. These solutions are not only improving accuracy, but also freeing up resources for other activities. 

Pressure to Reduce Costs

  • Regulatory compliance is expensive, with costs related to manual labour, fines for non-compliance, and potential reputational damage. With businesses under constant pressure to cut costs, regtech solutions are becoming attractive as a kind-of insurance policy. By automating and optimising compliance functions, regtech can significantly reduce the overhead associated with maintaining regulatory adherence, plus future-proof businesses who want the hassle taken out of keeping up with the latest regulations.

Regtech in the future

Yes, other subsectors that fall under the ‘fintech’ bucket will grow over the coming years, but if I was a betting man, I’d say that regtech has the best chance of an explosive growth period. As regulations become more complex, the demand for smarter, more efficient compliance solutions will only increase and those that profit will be those that protect and future-proof.

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