As new regulations and emerging technologies rapidly shape the UK’s finance sector, RegTech is emerging as a crucial solution for firms grappling with these changes. The global RegTech industry is projected to grow at an annual rate of about 24%, reaching a valuation of $28 billion by 2028. In the UK, regulatory shifts introduced by the Financial Conduct Authority (FCA) and other bodies are steering the finance industry in new directions. These changes aim to enhance consumer protection and streamline processes to foster growth. RegTech is playing an essential role in helping firms navigate these complex regulatory landscapes and avoid costly penalties.
One of the most notable recent regulations from the FCA is Consumer Duty. This regulation requires financial firms to provide transparent, honest, and reliable services, supported by solid data demonstrating compliance. While the full impact of Consumer Duty will become clearer over time, the initial challenges firms face in meeting these requirements highlight the growing need for RegTech solutions.
In 2023, the UK’s RegTech sector attracted £4.7 billion in funding, underscoring the country’s progressive stance on regulation and its position as a leader in this field. The sector’s growth trajectory is expected to continue, especially as the effects of Consumer Duty become more evident in 2025. This will offer a clearer picture of how these regulations are reshaping the industry.
Jeremy Baber, CEO of Lanistar, emphasizes that the success of UK RegTech should be viewed not only in the context of domestic regulation but also as a model for global financial markets. Recent regulatory developments, such as Europe’s DORA and the U.S.’s FedNow, illustrate the need for firms worldwide to adapt quickly. RegTech provides the tools to manage these changes effectively, ensuring compliance while capitalizing on new market opportunities.
Baber also notes that RegTech is enhancing speed and control in financial services, supporting the FCA’s efforts to regulate the sector more efficiently. As government budgets tighten, the adoption of RegTech solutions can significantly boost efficiency and support regulatory compliance.
In a period of global financial instability, regulation is essential to prevent systemic risk. While it can sometimes be seen as a barrier to innovation, RegTech offers a way to balance regulatory requirements with the need for progress. By addressing the challenges of regulation and promoting trust, RegTech is well-positioned for continued growth and impact in the financial industry.