1. Thinning of the herd
In the coming few weeks and months I’m certain we will see the exit of the first RegTech companies. There are a number of players currently funded through seed money or accelerator programs that will be nearing the end of their runway without a sustainable product or business model in place. Having sold risk management and compliance projects for the last 10 years, the Alyne partners understand the extremely lengthy sales processes with corporate clients in this market, however, many companies may have underestimated this. For others, the complexity of regulation may have exceeded the technology capability or there was simply no product market fit.
2. Emergence of leaders
At the moment, I would be hard pressed to name RegTech leaders, as many companies are still in very early stages. I believe that the next few months will reveal some leading companies with impressive traction in the market. These companies may well include established brands in software or consulting that produce a successful RegTech product. Our hope for the RegTech market is that there will be many complementary products that make responding to various regulatory topics easier rather than a “winner-takes-all” market that may stifle innovation.
3. New relationships
New technology, easier availability of data and smarter analytics will provide a new foundation for relationships between organisations and between organisations and their regulators. With the increased adoption of RegTech, suppliers for example can provide higher levels of assurance and transparency of their contractual obligations to their customers - potentially even before contract closing. Regulators and regulated organisations can leverage RegTech to increase control at decreased cost. It will be interesting to see which of the discussed parties can draw the greatest benefit from the new technologies and how the power in relationships may change.
4. New Technology
My final prediction - not for the immediate future of RegTech, but maybe the next few years - is the emergence of new technology to enhance RegTech. The vision many have at the moment to use Artificial Intelligence to respond to regulatory requirements is still unrealistic, however using machine learning to identify patterns in data and respond accordingly is highly possible. I also believe that blockchain may provide an interesting application to prove controls assurance within a network of providers, consumers and regulators of services. There is a very long path of increasing maturity of blockchain applications ahead before I can imagine the technology being useful for RegTech, but I definitely see great potential.
I’m certain that the entire RegTech market has exciting times ahead. I don’t think RegTech will ever reach quite the speed and dynamics of FinTech, as the consumers of RegTech aren’t quite as fast in their adoption of the capabilities, but it will become a sustainable and stable market. At Alyne, we can’t wait to shape it.