The first global benchmark study of the RegTech sector by the Cambridge Centre for Alternative Finance, conducted with the support of EY Japan, is based on a survey of 111 firms as well as regulators and industry experts. It introduces a data-driven segmentation of RegTech vendors, extrapolated estimates of market activity, and an overview of the actors and core elements of local RegTech ecosystems.
- The global RegTech industry generated an estimated $5 billion in revenue in 2018, and had raised $9.7 billion in external funding as of early 2019.
- The sector underwent a period of rapid growth between 2014 and 2018, but is now growing mostly through incumbent expansion rather than market entry.
- The financial services sector dominates demand for RegTech services but most vendors now target non-financial sectors, and this share is set to grow
- A few key technologies, including the cloud, natural language processing and machine learning, as well as big data analytics, are at the heart of RegTech activity.
- The RegTech market can be broken down into five distinct segments. The largest by funds raised to date are the profiling and due diligence and dynamic compliance segments, while the largest by turnover are the reporting and dashboards and risk analytics segments. A smaller market monitoring segment was also identified.
- Long sales cycles, complex IT planning within client institutions, difficulties in establishing trust and high levels of competition have left some vendors struggling to gain traction. A handful of larger vendors thus dominate most funding and commercial activity.
- Regulators have invested in building the RegTech ecosystem; however regulated sectors need to also make the internal, commercial case for investment in compliance automation.