Discovering our community: How Regtech (Regulatory Technology) is Transforming Compliance and Risk Management across industries

RegTech – which stands for Regulatory Technology – refers to using technology to help businesses comply with regulations efficiently and effectively. RegTech solutions often involve automation, data analytics, artificial intelligence (AI), machine learning (ML), blockchain, and other advanced technologies to streamline processes such as:

• Risk Management: identifying, assessing, and mitigating compliance risks.
• Compliance Monitoring: tracking adherence to laws, regulations, and internal policies in real-time.
• Reporting: automating and standardizing the generation and submission of regulatory reports.
• Fraud Detection: using algorithms and analytics to detect and prevent fraudulent activities.
• Data Management: ensuring data privacy and security in line with regulatory standards.

RegTech is widely adopted in industries such as financial services, insurance, healthcare, and telecommunications, where regulatory requirements are complex and subject to frequent changes. It aims to reduce costs, increase transparency, and enhance accuracy in compliance activities.

The Rapid Growth of RegTech in 2024: revolutionizing Compliance and Risk Management

In 2024, the RegTech sector has cemented its role as a pivotal force in transforming compliance and risk management across industries. As global regulations grow increasingly complex, businesses have turned to innovative technological solutions to navigate the challenging landscape efficiently. RegTech has emerged as a key enabler, blending cutting-edge technology with regulatory expertise to meet these demands. According to a report by GlobeNewswire, the global RegTech industry is expected to grow by 24.8% annually, reaching approximately $16.45 billion in 2024¹.

Several factors have contributed to the explosive growth of RegTech in 2024:

1. Evolving Regulatory Landscape: governments and regulatory bodies worldwide have introduced new policies to address emerging issues such as data privacy, environmental sustainability, and cryptocurrency oversight. The complexity and frequency of these changes have driven companies to seek automated, adaptive compliance tools.
2. Digital Transformation: businesses are increasingly integrating advanced technologies such as artificial intelligence (AI), machine learning (ML), and blockchain into their operations. RegTech solutions leverage these innovations to provide real-time compliance monitoring and predictive analytics, reducing the manual burden on compliance teams.
3. Rising costs of non-compliance: the financial and reputational risks associated with non-compliance have escalated. In 2024, regulators have imposed record fines on organizations failing to meet regulatory standards, making proactive compliance management a top priority.
4. Increased cybersecurity threats: as cyberattacks become more sophisticated, regulators are imposing stricter requirements to protect sensitive data. RegTech tools are helping companies enhance their cybersecurity strategy and comply with data protection regulations.

While financial services remain the largest consumer of RegTech solutions, adoption is expanding across other sectors, such as insurance, healthcare, telecommunications and environmental and sustainability reporting.

Challenges and Opportunities

Despite its rapid growth, the RegTech industry faces many challenges.

Firstly, regulatory fragmentation: variations in regulations across jurisdictions complicate the implementation of universal solutions; integration with Legacy Systems is a great challenge as well, since many organizations struggle to integrate RegTech tools with their existing – often outdated – infrastructure. There are also talent shortages: the demand for skilled professionals in AI, data science, and compliance exceeds supply.

The more rigorous cross-market regulations – that are about to be introduced – are likely to be the biggest challenge. The recent European regulations, such as the Digital Operational Resilience Act (DORA), the Markets in Crypto-Assets (MiCA), and the Artificial Intelligence Act (AI Act), are imposing stricter requirements on the digital financial sector. As a result, Regtech companies are developing innovative solutions to help financial institutions comply with these new regulations.

However, these challenges also present opportunities for innovation. RegTech providers are developing modular solutions that can adapt to diverse regulatory requirements and investing in user-friendly interfaces to simplify integration. Collaborative efforts between regulators and technology providers are fostering a supportive ecosystem for innovation.

Regtech companies are emerging as key partners for financial institutions, offering advanced technological solutions to navigate the challenges posed by new European financial regulations in the digital sector.

Fintech District community: Regtech companies

Fintech District, which gathers Italian most relevant fintech and techfin ecosystem, has witnessed a significant expansion in its RegTech sector and nowadays, there are 14 Regtech companies within the Community, reflecting the growing demand for streamlined compliance solutions: Aptus.AI, ARISK, CleverChain, Comforte, Condukt, Ecomate, Fourthline, INEO, Mopso, Thorsoft, Trakti, Trustfull, VERIDAS, Yousign. 

Among them, most companies have up to 250 employees. Some very small companies – three of them – have fewer than 10 employees. Only one company has more than 250 employees – Fourthline – with funding between €50M-200M, representing a benchmark in the industry. Yousign and VERIDAS have also already achieved significant size and significant funding (up to €50M). All companies follow a paid, direct sales model with various variations such as subscription model, premium model, pay-per-use model and so on.

Here are just some of the examples from FD Community Regtech companies, which closed significant partnerships or registered relevant initiatives.

• Trustfull, a leader in advanced fraud prevention and identity verification solutions, has established several strategic partnerships to enhance its services and expand its reach. Notable collaborations include:
• Banca Sella: Trustfull has partnered with Banca Sella to strengthen digital onboarding processes and enhance security measures.
• Scalapay: In collaboration with Scalapay, Trustfull aims to bolster fraud prevention efforts across Europe's Buy Now, Pay Later (BNPL) sector.
• Banca AideXa: Trustfull has teamed up with Banca AideXa to elevate Know Your Business (KYB) protocols and fraud prevention strategies for small and medium-sized enterprises (SMEs).
• Fourthline and Scalapay: the partnership between Fourthline and Scalapay is a great example of a win-win collaboration between Fintech District community companies. Scalapay – an Italian Buy Now, Pay Later (BNPL) provider – partnered with Fourthline – a European RegTech company – to enhance its regulatory compliance through automated customer verification technology. This collaboration enables Scalapay to efficiently conduct Know Your Customer (KYC) and Anti-Money Laundering (AML) procedures, ensuring adherence to evolving European regulations. Fourthline's proprietary technology utilizes artificial intelligence techniques, including computer vision, biometric data analysis, and optical character recognition, to verify customer identities and prevent financial fraud. 
• Yousing and Qonto: Yousign and Qonto have developed a collaboration that offers significant benefits to businesses. The collaboration between Yousign – specializing in electronic signatures – and Qonto – an online banking platform, part of the FD community – allows businesses to integrate electronic invoice management directly into their Qonto accounts. This means invoices generated through Yousign can be automatically imported into Qonto’s accounting system, simplifying supplier payments and saving valuable time.
• Aptus.ai and Intesa Sanpaolo: Intesa Sanpaolo, a leading European bank, partnered with the Italian Regtech company, Aptus.AI, to integrate artificial intelligence (AI) into its regulatory analysis processes. Aptus.AI's technology enables the bank to efficiently manage the increasing volume of national and international regulations by identifying new regulations, assessing their impact on the bank's operations, detecting risk areas in alignment with internal policies, and automatically generating customized document collections for specific profiles. This AI-driven approach enhances efficiency in regulatory compliance, improves risk management and allows to generate tailored documents.

Relevant international RegTech companies are expanding their presence in Italy, such as:

• Fourthline: offering comprehensive Know Your Customer (KYC) and Anti-Money Laundering (AML) solutions, tailored to meet Italy's compliance requirements, including support for Italian identification documents.
• CleverChain: specializing in automating anti-money laundering (AML) checks through an innovative SaaS platform. CleverChain is a London-based company, and it was co-founded by an Italian guy. Recently, it has expanded its operations into the Italian market by collaborating with ClubDeal Digital, one of the first operators in Italy to implement CleverChain's model for tracking the origin of raised and invested capital, as well as conducting compliance checks, Know Your Customer (KYC) verification, and automated AML screening. The independent report by Chartis Research² judged CleverChain as the best “KYB” (Know Your Business) solution for 2024 and 2025 and also awarded them for GenAI applications (“KIRA”).

These developments underscore the dynamic nature of the RegTech industry in Italy, with both domestic and international companies striving to enhance compliance and security.

Regtech: the road ahead

The future of Regtech looks promising. As businesses prioritize resilience and efficiency, RegTech will remain a cornerstone of modern compliance strategies.

In an era defined by rapid technological advancement and stringent regulatory oversight, Regtech’s growth is a testament to its necessity. By empowering businesses to navigate the complexities of compliance with confidence, Regtech is not just meeting the demands of today — it is shaping the regulatory landscape of tomorrow.

Further projections by Fortune Business Insights indicate that the market is set to expand from $15.80 billion in 2024 to $85.92 billion by 2032, exhibiting a compound annual growth rate (CAGR) of 23.6% during the forecast period³.