With emerging new trends and factors, including increased cost of compliance, a regulatory sandbox approach, and a low entry barrier for SaaS-based offerings, the regtech market's growth is anticipated to grow significantly.
FREMONT, CA:During the pandemic, the RegTech industry reached a market cap of 7.9 billion USD and is predicted to reach 23.76 billion in the near future. RegTech promotes smart data management for efficient customer onboarding using advanced technologies such as cognitive computing and machine learning. It also enhances the customer experience by automating key functions under customer service management processes. All these factors drive the RegTech market demand, along with new trends entering the industry.
Widespread Adoption of RegTech:Today, there is a tidal wave of general RegTech adoption. The efforts of regulators to promote RegTech use and the time and funds invested by RegTech providers are paying off. RegTech opportunities for regulated verticals are now fully accepted. Solutions used by early adopters, such as challenger banks and fintech companies, are now adopted by traditional and established banks, law firms, and real estate firms to bring the same level of automation and customer experience to their consumers as pioneered by the fintech and techfin companies.
RegTech-Aware Regulations:Regulations globally have adopted RegTech in several ways. Regulators actively promote RegTech use with their new visions. These regulators realise that RegTech reduces the regulatory burden in regulated institutions and their customers, lowering the pressure on regulators to keep rules light. The new generation of regulations assumes more RegTech is in use, enabling regulated institutions to implement complex rules with real-time updates and detailed regulatory reporting.
AI Advancements in RegTech:In the early days of AI in RegTech, the primary assumption was that it replaced human decisions with a machine learning model trained by a set of previously made human decisions. This approach can bring huge efficiency gains, but at a price. For instance, racial bias is ingrained in the training sets, training data security considerations, and removing human accountability in a situation where the financial institution is required by law to be accountable to the regulator. On the other hand, AI as a technology is ubiquitous and mature. There will be more machine learning use in RegTech systems, targeted to areas where it is safe and where vendors can ensure ethical AI implementations.
AML in the Metaverse:With the increasing metaverse speed, the need for digital identity and KYC processes is becoming more important. These areas become more pivotal in a globally connected metaverse than in a more fragmented financial system aligned with local and national regulations. The opportunities for misusing the metaverse’s potentially unlimited commerce system are considerably higher. Moreover, the opportunities for growth in many dimensions created by connecting humanity in one fair and open system are also increasing. These factors suggest establishing a global financial regulator for the metaverse to get ahead of the upcoming changes.
