The Cambridge Centre for Alternative Finance (CCAF) has launched its first Global RegTech Benchmarking Report with the support of EY Japan and developed in partnership with the International RegTech Association (IRTA).
The research reveals that while RegTech firms are growing their global footprint, partnerships and co-creation are required to overcome the constraints of sales cycles, legacy IT and market confusion.
IRTA members participated in The CCAF report, which is based on a survey of 111 RegTech firms and qualitative interviews with industry experts and regulators. Nearly two-thirds of vendors had a physical presence or significant market share in the UK, and nearly half have the same in the US. There are also significant RegTech activities in Australia, Canada, Singapore, Hong Kong, Japan, Luxembourg, Switzerland, Ireland, Germany and France.
Key findings include:
• The global RegTech industry generated an estimated $5 billion in revenue in 2018, driving by a surge of new start-ups in the past five years.
• The industry is expanding its global footprint. As of 2018, RegTech firms employed an estimated 44,000 people globally, having raised about $9.7 billion in external funding.
• 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 largest by funds raised to date were the Profiling and Due Diligence and Dynamic Compliance segments, while the largest share of turnover was claimed by firms in the Reporting and Dashboards and Risk Analytics segment. A smaller Market Monitoring segment was also identified.
• The report highlights the main challenges facing the industry; 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.
• The report suggests that partnerships and co-creation with clients and other partners can help overcome such constraints.
Commenting on the report Ben Richmond, CEO of the IRTA, said, “This report is an important piece of benchmarking on the impact of RegTech and opportunities for better industry alignment to scale adoption on a global basis. The key findings will help the IRTA to deliver our goal of supporting the development of the collaborative initiatives between regulators, institutions and solution providers to overcome constraints and co-create solutions.”
“Building a shared understanding of how and where the core technologies in RegTech are delivering more effective regulatory outcomes and the factors behind successful adoption is a vital building block for the industry. By sharing and building upon this insight, we can help shape and support the impact and growth of RegTech.”
The report was unveiled at FIN/SUM in Tokyo, the largest FinTech event in Japan. It will be shared with regulators, financial institutions and the broader RegTech ecosystem in multiple jurisdictions. The report is available to download from The Cambridge Centre for Alternative Finance.