EMERGING TECHNOLOGIES | BDO LLP
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35 EMERGING TECHNOLOGIES | BDO LLP
REGTECH
regulations, helped sales to hit £18.6 million in 2018. Onfido has raised more than $100 million, including $50 million in April from SBI Group, Salesforce Ventures and elsewhere. The global RegTech market is expected to grow from $6.3 billion in 2020 to $16 billion by 2025, at a growth rate of over 20%, according to a recent forecast from MarketsandMarkets. The key drivers cited in the report include ‘increased cost of compliance, the rising need for faster transactions, a regulatory sandbox approach to support RegTech innovations, and lower entry barriers with SaaS-based offerings’.
digital payments, and Trunomi, which securely manages consent for personal customer data. Chainalysis harnesses blockchain technology to combat money laundering, fraud and compliance violations in the cryptocurrency sector. BehavioSec uses behavioural biometrics software to predict and prevent problems caused by digital fraud, while PassFort automates the collection and storage of due diligence data. Onfido sits at #8 in the Tech Track 100 of 2019. Its machine learning technology is used by 1500+ organisations, including Revolut, to verify the identity documents of people accessing online resources, such as financial services and online marketplaces. Chief operating officer Eamon Jubbawy and chief executive Husayn Kassai started the London company in 2012 to help the 1.1 billion people in the world that the World Bank estimates have no proof of identity. Increasingly sophisticated frauds, and tighter industry and country-specific
regulation thinktank JWG estimated in 2016 that, by 2020, over 300 million pages of regulatory documents would be published, with more than 600 legislative initiatives to be catalogued by a medium- sized sell-side institution. RegTech solutions use big data and machine learning to help regulated companies to manage their risk, for example by accelerating due diligence processes, running real-time checks on transactions and potential customers using third-party data relating to the whole ecosytem, informing lending decisions, and analysing call-centre conversations to improve staff training and prevent mis-selling. Reporting and analysis is another big part of the RegTech offering. As well as disentangling and analysing vast datasets, RegTech solutions typically also enable FS organisations to identify potential weaknesses, drive up improvements and so de-risk future activity.
SCOPE AND DEFINITION Sometimes seen as a specialised subsection of FinTech, RegTech (regulatory technology) businesses use technology to help highly regulated businesses comply more easily and efficiently with the demanding regulatory regimes in which they operate. Several factors have contributed to the rise of RegTech. After the financial crash of 2008, regulations governing transactions were significantly strengthened around the world, while the rise of FinTechs brought the agility and improved customer experience of disruptive technology to the sector. But as digital services increased, so too did the risks of money laundering, fraud, cyber hacks and threats to privacy. So at the same that customers have come to expect less and less friction in their transactions, so the regulators continue to strengthen – and so make more complex – the compliance regimes that protect them.
NAMES AND NUMBERS Notable RegTech companies include Ascent, an AI-drive solution that automates repetitive and error-prone areas of compliance. Ascent achieved an annual revenue of $20 billion in 2019. Compliance Solutions Strategies, founded in 2016, serves 600+ software FS clients such as hedge funds, asset managers and fund administrators. Expected revenue in 2019 was over $35 million. Cisive, a global provider of compliance- driven human capital management and risk management solutions, delivers compliant onboarding and pre- employment background screening, including background checks, vendor/ contractor screening, drug testing, fingerprinting and paperless onboarding. Annual revenue was estimated at $25 million. Other well-known RegTech firms include IdentityMind Global, which delivers anti- fraud and risk management services for
The complexity and stringency is only heading in one direction too. AML, KYC, SMCR, CCPA, GDPR…. Different jurisdictions and authorities are releasing new or updated directives with increasing frequency, and just understanding which regulations impact on a business and how to de-risk for them becomes an increasingly onerous challenge. In an attempt to quantify the complexity, CYBERSECURITY, ALREADY ONE OF THE BEST-FUNDED SUB- SECTORS OF REGTECH FOR SEVERAL YEARS, COULD SEE EVEN BIGGER OPPORTUNITIES AHEAD .
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