In the UK, the Financial Conduct Authority (FCA) and other regulatory bodies have introduced new rules aimed at reshaping the finance industry – some to protect consumers, others to streamline regulations and fuel growth. In both scenarios, RegTech has emerged as a critical tool, enabling firms to manage complex regulatory shifts and steer clear of penalties.

One of the FCA’s most notable regulations in recent years is the Consumer Duty, designed to compel financial firms to offer transparent, honest, and reliable services to customers. A key aspect of Consumer Duty requires firms to provide concrete evidence – backed by data – that they are meeting these regulatory demands. While it remains too early to fully assess the outcomes of this regulation, there's no doubt that firms have faced significant challenges in demonstrating compliance. These challenges are precisely where the expanding RegTech industry comes into play.

In 2023, the City of London reported that the UK’s RegTech industry attracted £4.7 billion in funding, crediting the country’s “forward-thinking” regulatory approach for its leadership on the global stage. All indications suggest that this growth trajectory will continue, particularly as we approach 2025, when the full effects of Consumer Duty will likely become clear, allowing for a more comprehensive analysis of its impact.

Commenting on the strength of the UK’s RegTech industry, Jeremy Baber, CEO of Lanistar, said: “Whilst it’s important to consider the success of UK RegTech in the context of UK regulation, it’s also key to consider how the UK can present a gold standard for regulation and RegTech to the rest of the financial world. Over the past few years, there have been some extremely significant regulatory changes, such as DORA in Europe and FedNow in the United States. For the stability of the global financial ecosystem, firms need support to address the incoming changes with these regulations to make sure they are not only avoiding risk but also maximising what is to gain from the new market conditions created as a result.”

Baber continued: “Looking to the future, RegTech is bringing speed and decisive controllership into the financial services industry and will ultimately assist the FCA in regulating the sector. With central government budgets squeezed, the adoption of RegTech under the FCA guise will substantially improve efficiency in this area.

At a time of global instability, regulation is absolutely crucial to ensure the financial ecosystem negates the risk of collapse. Sometimes seen as a necessary evil, regulation can slow processes and can be seen to stagnate innovation and progress. The need to regulate, instilling trust and necessary parameters to RegTech serves as a worthy antidote to the more negative aspects of regulation. As a result, it is therefore no surprise to see RegTech poised for growth in the near future.