Spending on regtech will grow by an average of 48 per cent per annum over the next five years, rising from $10.6 billion in 2017 to $76.3 billion in 2022 – as banks seek to avoid costly regulatory fines.
The figures are contained in a new study from Juniper Research.
Key Regulatory Fines Since the Financial Crisis of 2008:
The research, Regtech Strategies for Financial Services 2017-2022, found that regtech spending, as a percentage of regulatory spending, will increase dramatically, from 4.8 per cent in 2017 to 34.4 per cent by 2022.
This represents a vast opportunity for regtech vendors, who can capitalise on banks seeking efficiency in meeting regulatory compliance requirements.
With multinational financial institutions such as Citi having as many as 30,000 compliance staff, just three bank compliance departments could fill London’s Wembley Stadium. Automation has huge potential to reduce this.
This level of staffing means that a 50 per cent reduction could save a single large bank $1.2 billion per annum, based on average wages.
The research also found that AI automation of KYC (Know Your Customer) checks will reduce time required by 90 per cent, generating time savings of 5.4 million hours annually by 2022.
According to the study, regtech investment will be dominated by established technology players, such as Cisco and IBM, as demonstrated by their acquisitions of CloudLock and Promontory respectively.
Juniper anticipates that existing vendors of financial services software, such as Oracle and SAP, will look to enhance their offerings with Regtech features and possibly acquisitions. Consultancy firms, such as Deloitte and KPMG also have a key role and may look to partner with regtech vendors.