Over the next five years, the fintech analysis firm of Juniper Research believes that firms' spending on regulatory technology will rise sixfold to US$115 billion per annum. It expects the main cause of this increase to be "know-your-customer validation and Cloud migration."

A new study from Juniper Research has found that spending on Regtech platforms will exceed US$115 billion by 2023, up from an estimated $18 billion in 2018. The research found that ever-more onerous regulation, as demonstrated by the recent General Data Protection Regulation in the European Union, is driving businesses to use regtech to support their compliance efforts. According to the research, any heavily regulated business sector that does not embrace regtech to keep pace with regulatory changes will leave itself open to swingeing fines.

The report also predicts a sharp increase in spending on regtech (an average of 45% per annum between 2018 and 2023) and expects it to be far higher than that for compliance as a whole (17%).

The research, available at the very reasonable price of £2,250 with a generous 30 minutes of an analyst's time thrown in, found that KYC checks for anti-money-laundering purposes are ripe for 'disruption' (i.e. improvement) by artificial intelligence systems because traditional, paper-based systems are so inefficient. In banking and property sales, so Juniper forecasts, annual gross cost savings from the introduction of AI for KYC purposes will exceed $700 million by 2023, a nine-fold increase over today's figure.

Research author Nick Maynard told Compliance Matters: “AI-powered ID solutions are uniquely suited to reducing the resources needed to verify identity. By integrating the correct KYC tools into cloud-based systems, financial institutions can dramatically reduce their compliance burdens.”

Juniper analysed various bits of software in the regtech sector, collecting figures about the likely timescale in which they might take effect, cost barriers and firms' willingness to do new things. It concluded that Cloud computing is "currently the most disruptive force in compliance."  

The transition to cloud-based compliance is a crucial precursor to the use of other approaches to regtech such as AI or Big Data. If businesses do not use the Cloud properly, Juniper argues, they will struggle to use these advanced techniques.