This year, 75% of the world's population will have their data covered by modern privacy regulations, compared with just 10% in 2020. In a short time, the digital world has shifted from being an unregulated space to one where personal information is carefully guarded. It’s like waking up to find that three out of every four people you see are now shielded by strong data protections—a major change that is reshaping how businesses and IT teams handle data. Welcome to RegTech.

Overview of RegTech

RegTech, short for "Regulatory Technology," refers to the application of innovative technologies such as artificial intelligence, machine learning, blockchain, and cloud computing to help businesses efficiently manage regulatory compliance and risk. It streamlines complex compliance processes by automating tasks like reporting, monitoring, and fraud detection.

The RegTech market is experiencing rapid growth, driven by increasing regulatory complexity and the need for technology-based compliance solutions. In 2023, it was valued at approximately $12.82 billion and is projected to grow at an impressive compound annual growth rate (CAGR) of 23.6% from 2024 to 2032. 

There is clear growing demand for solutions addressing Anti-Money Laundering (AML), Know Your Customer (KYC) processes, and compliance with global data privacy regulations such as GDPR and CCPA. Furthermore, advancements in cloud computing and artificial intelligence are helping streamline compliance operations and enhance risk management, contributing to the sector's appeal​. 

Sectors Poised for Disruption by RegTech

• Compliance Management - RegTech streamlines adherence to complex regulatory frameworks across industries. It automates tasks like monitoring regulatory updates and ensures accurate, real-time compliance reporting, reducing the manual effort and risks associated with non-compliance. ​

• Risk Management and Reporting - Financial institutions and other regulated sectors can use RegTech to identify, assess, and mitigate risks more effectively. Advanced analytics and machine learning enable precise forecasting and real-time risk reporting. 

• Fraud Prevention - RegTech platforms enhance fraud detection and prevention by leveraging AI and machine learning to monitor transactions for suspicious activities, such as money laundering or insider trading, providing businesses with enhanced security. 

What Makes RegTech so Vital

The financial industry is facing more complex regulations than ever before, creating great challenges for institutions (monitoring, reporting, compliance, ..). But today, 75-80% of these processes can be automated. This not only makes compliance more transparent and standardized but also helps reduce costs. In fact, 70% of financial institutions plan to focus on cutting compliance costs in the next year.

RegTech also improves risk management. It allows institutions to analyze large amounts of data more effectively, monitor compliance in real-time, and use predictive tools to manage risks. Regulators also benefit from these tools, which strengthen their ability to oversee the industry.

Efficiency and cost savings are major benefits of RegTech. Automation reduces human errors and increases the ability to scale operations. This has led to significant cost reductions, with technology now accounting for 50.9% of financial crime compliance spending.

RegTech also strengthens security and helps prevent fraud. Advanced tools for identity verification and authentication are tackling financial crime, which is a growing problem—83% of mid-to-large organizations have reported more alerts in this area. Additionally, RegTech uses AI and analytics to detect and stop fraud while ensuring strong data security and privacy.

For financial institutions, RegTech provides a competitive edge. By improving compliance processes, companies can reduce risks and achieve growth goals that might otherwise be out of reach. It also encourages innovation and collaboration in the regulatory space, making it easier to adapt to new technologies and changing rules.

Rising technologies like AI, machine learning, and blockchain are playing a big role in modern compliance. These tools meet the increasing data demands of regulations while supporting the creation of new digital services. RegTech also improves the customer experience by simplifying compliance steps, such as onboarding, and reducing administrative hurdles. This makes financial services smoother and more efficient for everyone involved.

Investment Opportunities in RegTech 

RegTech is best defined by its scalability and recurring revenue potential, with many companies operating subscription models that ensure predictable growth. Beyond financial services, RegTech applications are extending into adjacent sectors such as healthcare and real estate, creating new revenue streams and diversifying risk exposure. Companies that integrate fraud detection, predictive analytics and identity verification systems into their offering can gain a competitive edge, especially as demand for these capabilities continues to grow globally. Below are a few investable subsets:

• Compliance Management Solutions - Automate and streamline regulatory compliance processes.

• Identity Verification and KYC -  Enhance customer onboarding and fraud prevention.

• Risk Management Systems - Analyze and mitigate various types of financial and operational risks.

• Regulatory Reporting Tools - Facilitate accurate and timely reporting to regulatory bodies.

• AML and Fraud Detection - Leverage AI and machine learning to combat financial crime.

• Digital Assets Compliance - Address regulatory challenges in crypto and NFT markets.

   

It's worth noting that M&A activity in this area has been high, with major financial and technology companies looking to acquire innovative solutions to bolster their own offerings. Combined with government incentives and regulatory pressure for technology adoption, RegTech sits at the crossroads of need and innovation, making it an essential part of the future compliance landscape.

Strategic Insights for Investors

Key Private Players

• Global Ledger - True innovator in blockchain analytics and crypto anti-money laundering (AML) , specializing in providing cutting-edge tools to monitor and analyze cryptocurrency transactions. The Swiss-based platform empowers financial institutions, governments, and businesses to mitigate risks, combat financial crimes, and improve regulatory compliance. 

• ComplyAdvantage - Specialist in AML and fraud detection with its AI-powered platform. The company’s platform monitors financial transactions in real-time, delivers risk assessments, and ensures compliance with global regulations. It integrates easily with existing systems, making it an efficient tool for preventing financial crime. Supported by investors like Balderton Capital and Index Ventures, ComplyAdvantage has raised over $100 million to advance compliance technology.

• Elliptic - Blockchain analytics company focused on bringing transparency to cryptocurrency transactions. Using machine learning, its platform detects and traces illegal activities, helping businesses meet AML standards and regulatory requirements. Trusted by financial institutions and crypto exchanges, Elliptic plays a key role in fighting financial crime in the decentralized economy. The company has received more than $104 in funding from major backers like Wells Fargo Strategic Capital and SoftBank.

Risk Factors

• Regulatory Uncertainties - As regulations vary across jurisdictions and evolve frequently, businesses may struggle to adapt their solutions to meet global compliance requirements. The lack of harmonization in regulatory frameworks can delay implementation and increase costs​. 

• Market Fragmentation - The RegTech market is highly fragmented, with numerous providers offering niche solutions. This creates challenges for organizations seeking cohesive, integrated systems, as they may need to work with multiple vendors, leading to inefficiencies​

• Data Privacy Issues - RegTech platforms often rely on large volumes of sensitive data for analytics and reporting. Compliance with data privacy laws such as GDPR and CCPA adds complexity and increases the risk of non-compliance if data is mishandled

The Bottom Line 

RegTech is truly transforming the regulatory landscape, turning compliance from a costly obligation into a strategic asset. With advances in AI, blockchain and machine learning powering it, it doesn’t just solve problems—it reimagines the entire approach to risk and regulation. As global rules grow more intricate and businesses race to digitize, RegTech emerges as the essential bridge between innovation and control, where cutting-edge technology meets the pressing demands of a fast-evolving world. Its rise isn’t just about keeping up—it’s about staying ahead.

At Acquinox Capital, we recognize the evolving landscape of RegTech as a significant area of interest for value creation and strategic engagement. By leveraging thorough market research and forward-thinking strategies, we aim to support our clients in navigating this dynamic sector.