The Regtech industry in 2022 is growing rapidly. As regulation across payments, gambling, crypto, and Buy Now Pay Later continues to become more stringent, there is no surprise that we are seeing a boom in the interest in services which can satisfy the need to verify the identity of customers and prevent money laundering and fraudsters from infiltrating businesses.
It’s become all too common to see a business hit with a huge fine, be that monetary or reputational, due to failings in compliance. The need to verify identity has always been a requirement for these types of industries, but it is becoming increasingly complex to keep on top of compliance when done manually.
This is where Regtech comes in. Regtech is built on not only reducing the complexity of compliance, but also to reduce friction within the onboarding journey of customers and ensure all the ‘right’ type of customers can enjoy an efficient customer journey, and all the ‘wrong’ type of customers are identified and investigated.
It’s not just an intuition that the need for Regtech is growing, as reported in the Global Regtech Market report, The global Regtech market is expected to grow from $7.90 billion in 2021 to $9.88 billion in 2022 at a compound annual growth rate (CAGR) of 25.1%. The global Regtech market size is then expected to grow to $23.76 billion in 2026 at a CAGR of 24.5%.
It’s certainly a completely different landscape to when W2 was founded back in 2011 with only a few other companies in the UK having the idea to ‘make compliance simple.’
The Importance of Technology
Complying with AML directives, KYC regulation, the Financial Action Task Force (FATF), and others is inherently a key aspect of the industry. The core service that is being provided is data and services which help companies comply with growing regulation, whether they are an IFA based in Bristol or a national eco pension provider.
But the power of technology with Regtech is where the industry really brings value. It’s becoming less popular for businesses to go directly to Credit Reference Agencies and data suppliers globally to complete their compliance protocols manually as it simply becomes too much to manage all of the supplier relations, minimum order values, and contracts to satisfy their needs.
Regtech is built on one single source of truth and advanced technology which can enable all of the management of various providers into one access point.
One Size Does Not Fit All
One of the more complex aspects to achieving a compliant business model is the interpretation of regulation. Whilst on the surface regulatory requirement can appear to be clear and structured, different companies will have various intricacies which they wish to achieve based on their interpretation of the regulation, and their internal CSR strategy.
Regtech allows these companies to develop various workflows and structures of services for different situations depending on how they want their onboarding journey to look. Whether it’s starting with a simple KYC check and proceeding to document verification if the check fails or beginning with a document check and processing an AML check in conjunction, Regtech has learned that a blanket approach to compliance isn’t feasible for most.
As the Regtech industry in 2022 continues on its growth journey, so does the interest in the industry from outside sources. In the past 6 months alone, we have seen huge consolidation in the market with various mergers, partnerships, and takeovers happening.
Again, this is clear evidence that the industry has come out of infancy and is starting to establish itself as the go to way of achieving regulatory compliance. Some industries, such as the high street banks or global corporations, have the ability to develop their own in-house solution but for SMEs and companies who are happy to outsource their needs to the experts, the popularity will only grow.
What’s Next for Regtech?
It’s an exciting time for the Regtech industry in 2022 and beyond. Regulation will only grow, and technology is continually becoming more advanced leveraging the admissibility of social media evidence. The figures published in the Global Regtech Market Report are proof that this is the start of continued growth for the Regtech industry.
Not only are more businesses becoming interested in the idea of cutting-edge technology meeting identity verification but also more industries such as cryptocurrency and buy now pay later will become fully regulated and identify the need for Regtech to be an integral part of their business structure.
If you or your business are interested in hearing how W2 has established itself as a leading provider in the industry, you can contact us here.