Compliance Costs Are Climbing. RegTech Offers a Way Out.
In March, Maria Santos, head of compliance at a midsize UK bank, faced an overwhelming problem. Her team was buried in false alerts from legacy monitoring systems. Nearly 60% of flagged transactions were false positives. Within two months of adopting ComplyAdvantage’s AI-based screening platform, her team cut false alerts by 75%. They also reduced manual reviews by half.
Stories like Santos’s are becoming more common. Compliance risk functions are being stretched by rising costs, regulatory volatility, and operational bottlenecks. Traditional tools are no longer fit for purpose.
Financial Institutions Are Paying More to Stay Compliant
In 2024, global compliance spending topped $270 billion, up from $213 billion just two years earlier. According to LexisNexis Risk Solutions, EMEA firms spent $85 billion, roughly 40% more than their U.S. counterparts. The cost trajectory is steep and expected to keep rising through 2026.
Regulatory intensity is another pressure point. In 2024, firms received an average of 257 regulatory updates each day. This figure is nearly double the volume from pre-pandemic levels, according to Thomson Reuters. For many risk teams, keeping up is no longer viable without automation.
TD Bank’s $3.1 billion penalty last year highlighted just how costly non-compliance can be. Regulators found the bank had failed to adequately monitor nearly 90% of its transactional activity over several years. That failure was not due to negligence, but to outdated systems that could not scale.
RegTech Is Moving Into the Core
Regulatory technology, once a niche solution, is now central to financial operations. The RegTech market reached $15.8 billion in 2024 and is projected to exceed $80 billion by 2032, according to Fortune Business Insights. That growth is driven by necessity and by regulators actively encouraging automation.
Companies like Ascent, ComplyAdvantage, and ComplyCube are leading a wave of transformation. Their platforms combine AI, real-time analytics, and automation to detect risk quickly and generate complete audit trails without manual intervention.
Jumio and Onfido, which focus on identity verification, have helped banks reduce onboarding times by more than 70%. That also cuts abandonment rates and improves customer experience, a win for both compliance and business units.
Compliance Shifts From Reactive to Predictive
Older systems focus on flagging issues after the fact. RegTech enables forward-looking monitoring. AI can scan internal data, customer behavior, and external threats to catch anomalies before they escalate.
One Singapore-based bank used machine learning to detect internal fraud two months before manual controls would have identified it. These platforms are not just improving efficiency. They are changing the role of compliance from checker to strategic watchdog.
Smaller firms are also gaining access. Cloud-based RegTech tools scale easily, allowing startups and regional players to meet global standards without enterprise-level infrastructure.
Adoption Varies by Region
North America leads global RegTech spending with a 45% share. EMEA is growing quickly as rules like GDPR and MiFID II drive demand for automated tools.
Asia-Pacific is catching up fast. AML-related fines in the region jumped 266% in the first half of 2024. Regulators in Singapore and Hong Kong are launching sandboxes and offering guidance to accelerate adoption of automated compliance systems.
The UK’s Financial Conduct Authority expanded its sandbox program again in 2024. It approved 15 new RegTech pilots, up 50% from the year before.
Not Plug and Play
Despite the hype, RegTech implementation is not instant. Many firms discover their data is siloed and inconsistent, limiting what automation can achieve. Others face cultural resistance.
One European insurer saw a nine-month delay due to fragmented infrastructure across divisions. Regulators raised concerns about the lack of explainability in the model. As a result, a Swiss private bank paused its AI-based compliance rollout.
Successful adoption often depends more on internal readiness than on the technology itself. Change management, governance, and data hygiene are all critical.
Five Trends to Watch in 2025
| Trend | Why It Matters |
|---|---|
| Explainable AI | Regulators are demanding transparency in decision-making |
| Embedded compliance tools | Integrated solutions are replacing standalone software |
| Digital asset surveillance | Crypto and token flows are now under tighter scrutiny |
| ESG reporting automation | EU mandates are pushing structured sustainability data |
| Regulator-tech collaboration | Sandboxes and pilots are speeding up real-world adoption |
RegTech Is Becoming Infrastructure
Accenture estimates that RegTech can reduce compliance costs by up to 30% and improve detection accuracy by 40%. That is not just about saving time. It changes how risk functions operate.
Firms still relying on spreadsheets, static rules, and manual alert queues are being left behind. Compliance today requires real-time analysis, smart triage, and continuous oversight.
Regulators are evolving. Criminals are adapting. Compliance must do the same. RegTech is not just a tech upgrade. It is the infrastructure modern financial firms need to survive.
