As new regulations and the impact of new technologies influence the UK’s finance industry at a rapid rate, RegTech is set to answer the call of struggling firms and grow rapidly
The global RegTech industry is set for an annual CAGR rate of approximately 24%, which would push it to a valuation of $28bn by 2028. In the UK, new regulations brought on by the Financial Conduct Authority (FCA) and other regulatory bodies have aimed to push the finance industry towards a new direction, in some cases aiming to protect consumers and in others, cutting existing red tape to turbocharge growth. In either case, RegTech is proving to be a vital cog in the industry machine, helping firms to navigate complex regulatory changes and avoid falling foul of fines.
One of the FCA’s most significant new regulations in recent years is Consumer Duty, which was specifically designed to force financial firms to deliver customers open, honest, and reliable services on behalf of the consumer. The key detail with Consumer Duty is that firms had to prove – with hard data – that they were meeting the demands of the regulatory change. A year on, the fully-fledged results of the regulation remain to be seen, but what is without doubt is the complex set of challenges firms have faced in proving compliance. Challenges such as this are the bread and butter of the ever-growing RegTech industry.
In 2023, the City of London stated that the UK’s RegTech industry received £4.7 billion in funding, citing the UK’s “forward-thinking” approach to regulation positioning it as a global leader. All signs show that continued growth is on the cards, particularly in 2025 when the results of Consumer Duty are likely to become crystalised – meaning its impact will be better understood for all to analyse.
Commenting on the strength of the UK’s RegTech industry, Jeremy Baber, CEO of Lanistar, said: “Whilst it’s important to consider the success of UK RegTech in the context of UK regulation, it’s also key to consider how the UK can present a gold standard for regulation and RegTech to the rest of the financial world. Over the past few years, there have been some extremely significant regulatory changes, such as DORA in Europe and FedNow in the United States. For the stability of the global financial ecosystem, firms need support to address the incoming changes with these regulations to make sure they are not only avoiding risk but also maximising what is to gain from the new market conditions created as a result.”
Baber continued: “Looking to the future, RegTech is bringing speed and decisive controllership into the financial services industry and will ultimately assist the FCA in regulating the sector. With central government budgets squeezed, the adoption of RegTech under the FCA guise will substantially improve efficiency in this area.
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By GlobalData
“At a time of global instability, regulation is absolutely crucial to ensure the financial ecosystem negates the risk of collapse. Sometimes seen as a necessary evil, regulation can slow processes and can be seen to stagnate innovation and progress. The need to regulate, instilling trust and necessary parameters to RegTech serves as a worthy antidote to the more negative aspects of regulation. As a result, it is therefore no surprise to see RegTech poised for growth in the near future.”
