Spending on regulatory technology (RegTech) will hit more than $130 billion by 2025, as Financial Services companies and other sectors look for faster and more efficient ways to meet their compliance obligations.

Global spending last year on the technology was $33 billion, so the forecast represents an increase of 294 percent over five years – a compound annual growth rate (CAGR) of nearly 32 percent.

According to analyst firm Juniper Research, which has produced the figures, growth will be driven by increased use of artificial intelligence (AI) to automate manual tasks, along with a transition to digital onboarding.

An estimated 330 million new bank accounts worldwide will be opened via digital onboarding by 2025, up from 184 million in 2020 – an increase of 79 percent.

By 2025, nearly 18 percent of that onboarding will use AI, compared with less than four percent last year.

The introduction of AI to areas like ID verification will mean that businesses can move to fully digital Know Your Customer (KYC) systems, claims the firm. This could provide cost savings of over $460 million in banking onboarding alone.

Both AI-based automation and digital onboarding have become critical during the pandemic, according to Juniper’s new report, RegTech: Market Opportunities, Challenges & Forecasts 2021-2025 – Market Research, and an accompanying white paper, The Role of RegTech in a Post-Pandemic World.

However, it will be equally important for systems and decisions to remain explainable and transparent, caution the documents.

Research author Nick Maynard explained, “Digital onboarding has been accelerated by lockdown measures, but ultimately, it is an acceleration of existing trends towards greater digital engagement.”

In this sense, increased adoption mirrors the greater use of cloud collaboration platforms and mobile tools during the pandemic, which also saw an acceleration, rather than an overnight transformation caused by mass homeworking.

“Businesses should rebuild their KYC and onboarding processes from the ground up to take advantage of these new capabilities, or they will lose ground to digitally native competitors,” Maynard added.

Recent research has found that new banking customers in particular favour low-friction mobile or online services to traditional offerings, while Statista has found that some form of digital or mobile banking is now used by roughly three-quarters of customers.

It stands to reason that onboarding and ancillary services will need to be part of the same low-friction experience to avoid pushing end-users towards rival providers.

Source: Press release