Those firms exploring the benefits of RegTech would be well advised to look beyond the hype and focus on questions of credibility and trust, as well how the AI has been developed. That’s according to Paul Lyon, Chief Marketing & Communications Officer, FinregE.
Anyone who has spent time in regulatory technology over the past decade cannot fail to have noticed the dramatic acceleration that has taken place during the past eighteen months. A market that once occupied a relatively specialised niche of financial services technology has suddenly become one of the industry’s most active areas of innovation, investment and competitive activity.
Part of that change is, undoubtedly, attributable to artificial intelligence. The dominance of AI has transformed expectations around what regulatory compliance technology should be capable of delivering. Tasks that once required substantial human intervention are increasingly being automated. Regulatory intelligence that previously demanded extensive manual effort can now be gathered, analysed and operationalised at a scale that would have seemed ambitious only a few years ago.
The enthusiasm is reflected in the forecasts. Grand View Research estimates the global RegTech market will grow from approximately $20bn today to more than $80bn over the coming decade, while other analysts predict even faster expansion in AI-driven segments of the market. Such projections may ultimately prove optimistic or conservative, but the direction of travel is difficult to dispute. Regulatory complexity continues to increase, compliance budgets remain under pressure and organisations are actively searching for ways to improve both efficiency and oversight.
Yet what strikes me most is not the pace of technological development itself. It is the growing maturity of the buying conversation.
Only a few years ago, the challenge for many RegTech firms was persuading organisations that technology could meaningfully improve compliance processes. Today, that argument has largely been won. Most financial institutions, insurers and other regulated organisations accept that technology will play a central role in managing regulatory obligations. The debate has moved on.
Increasingly, the question is not whether a provider uses AI but how that AI has been developed, how deeply it is embedded within the underlying platform and whether clients can have confidence in the outputs it generates.
This is where a distinction is beginning to emerge between firms that are genuinely AI-native and those that have incorporated AI into existing products more recently. Neither approach should be dismissed. Many established providers possess substantial domain expertise, deep client relationships and significant data assets. Equally, some newer entrants are producing genuinely innovative solutions. Nevertheless, there remains an important difference between building technology around AI from the outset and retrofitting AI capabilities into systems originally designed for a different technological era.
As buyers become more sophisticated, I suspect that distinction will matter increasingly.
At the same time, another theme is becoming more prominent: trust.
Technology markets often assume that superior functionality ultimately determines winners and losers. In regulated industries, however, the equation is more complicated. Organisations are not merely purchasing software. They are relying on technology to support decisions with operational, regulatory and reputational consequences. Accuracy, explainability and governance all matter. And the ability to demonstrate why a conclusion has been reached matters.
Perhaps most importantly, credibility matters.
Indeed, one of the more interesting developments over the next few years may be the growing importance of regulatory credibility as a competitive differentiator. Historically, technology companies have focused primarily on winning the confidence of clients. Increasingly, however, I suspect that trust within the broader regulatory ecosystem will become an equally important measure of long-term success. Not because regulators should endorse particular technologies, but because firms that consistently demonstrate expertise, rigour, transparency and constructive engagement are likely to enjoy advantages that extend well beyond individual product features.
None of this diminishes the importance of AI. On the contrary, artificial intelligence will continue to reshape the market and the firms that fail to innovate will inevitably struggle. Yet as the industry matures, technology alone is unlikely to be the sole determinant of success.
If the first phase of RegTech was defined by adoption, the current phase is being defined by AI. And the next phase may well be defined by which organisations successfully combine technological innovation with credibility, trust and genuine regulatory expertise.
In a market increasingly crowded with AI claims, those qualities may prove harder to replicate than the technology itself.
About the Author:
Paul Lyon is the Chief Marketing & Communications Officer for FinregE – The End-to-End Regulatory Operating System, trusted by Tier 1 financial services firms, corporates and regulators.
Read the blog on Finextra.
