Regtech may be defined as the use of data and technology to make regulatory compliance cheaper, faster and better. The strategic deployment of Regtech within an organization could enable both business development as well as business optimization. Regtech in the financial services sector may be seen as having three distinct phases related to the evolution of financial regulatory regimes as well as developments in data and technology. The first phase was in the 1990s and 2000s under the internal risk management regimes which led to the development of regulatory risk analysis and calculations such as Value at Risk. The aftermath of the 2008 financial crisis saw a complete overhaul of the regulatory regime with far more onerous reporting requirements, and this led to the growth of Regtech with the rise of digitization in areas such as regulatory reporting, regulatory and compliance management including horizon scanning and general compliance. The use of technology and data analytics to understand market integrity and transparency also became more prominent driven by the need of regulators and market participants to understand systemic market risk. This phase could be seen as the use of “big data” in meeting regulatory requirements and demonstrating regulatory compliance.

Over the last decade or so the Regtech industry has continued to expand rapidly with some estimates putting the compounded annual rate of growth at around 20% with the current market size estimated at around $9 billion. The current and coming era of Regtech looks to be focused on the use of “smart data” to deal with complex regulatory and compliance issues. The use of “smart data” will very likely require the development of third party providers who either hold or access the data and cyber, identity and privacy are key concerns in this regard and will likely lead to the rise of regulatory data and information management systems incorporating these principles. Financial crime is the biggest area of focus in the Regtech space with environmental social and governance one of the fastest developing areas.