Beyond Banking: The Rapid Rise of Multi-Vertical Regtech

Regtech vendors are expanding their focus beyond Financial Services into other regulated industries like Gaming, Insurance, Healthcare, and Telecommunications.

As a Staffing Solutions firm deeply familiar with Regtech, we examine this multi-vertical growth and its implications. 

Introduction

Regulatory Technology (Regtech) emerged in recent years to help Financial Institutions (FIs) efficiently comply with increasingly complex regulations using innovative technologies like automation, analytics, and artificial intelligence. Regtech solutions have become vital for Banks, Insurers, and other FIs to manage compliance in areas like know-your-customer (KYC), anti-money laundering (AML), and regulatory reporting.

Leading Regtech vendors are rapidly expanding their solutions into diverse industries beyond Financial Services. This multi-vertical approach represents a significant growth opportunity as regulatory compliance becomes a priority across multiple sectors.

Going Multi-Vertical

• Regtech vendors initially focused on Banking now offer tailored AML and KYC solutions to meet complex regulations in the Gaming Industry.
• Regtech solutions help companies manage ESG programs by automating sustainability reporting, providing carbon accounting tools, analysing emissions data, and aiding in auditing and due diligence.
• Major identity verification providers are tailoring their platforms to serve KYC and customer due diligence needs in the Telecommunications Industry.
• Leading communications monitoring Regtech firms are expanding capabilities for social media oversight and pharmacovigilance regulations in the Pharmaceutical Sector.
• Top providers are adapting workflow automation, data analytics and visualisation capabilities for various regulations in Retail, Healthcare, Transportation and other sectors.
• Prominent cybersecurity-focused Regtech firms are moving into heavily regulated sectors like Energy and Utilities to provide tailored security solutions.
• AML and KYC solutions are being customised by Regtech providers for Real Estate regulations, including beneficial ownership disclosure rules.
• Expansion of regulatory reporting and integrated risk management solutions into Agriculture, Aviation, Hospitality and many other verticals.

Driving Factors Behind Regtech’s Multi-Vertical Expansion

Cross-sector applicability makes Regtech’s expansion potential extraordinary. There are several key factors are driving the evolution of Regtech beyond its origins in the Financial sector; here are some of the key ones:

• Increasing Regulation Across Sectors: The proliferation of strict regulations across industries necessitates automated and efficient Regtech solutions.
• Revenue Growth Opportunities: Regtech providers can significantly grow their customer base and revenues beyond crowded Financial Services by expanding into new verticals. The broader market is appealing.
• Cross-Applicability of Technology: Many of the automation, data analytics and AI tools used for regulatory compliance in Banking can also be applied to meeting regulations in other sectors. This allows Regtech vendors to repackage solutions.
• Industry Convergence: With digital technologies becoming ubiquitous, the boundaries separating sectors are diminishing. This blend of industries opens the door for Regtech solutions catering to converging needs.
• Consolidation among vendors: mergers and acquisitions bring together providers, strengthening vendor offerings.
• Adoption of cloud-based solutions: Many AML technology vendors now offer cloud-based platforms for more flexible and scalable intelligence across the enterprise.
• Scaling compliance: Wider industries are facing increased regulations and compliance costs. Regtech can help scale compliance efficiently across sectors.
• Startups expanding focus: Many new Regtech startups are now developing solutions tailored to non-financial sectors from the outset rather than just Finance.
• Increasing Data Volumes: titanic amounts of customer and transaction data must be processed to meet AML regulations. Regtech leverages big data analytics, machine learning and AI to uncover insights and patterns efficiently.

Challenges Faced by Regtech Vendors Entering New Sectors

Expansion, while potentially lucrative, comes with its hurdles:

• Learning New Regulatory Environments: Grasping new regulatory nuances requires time and expertise. Keeping up with the rapidly evolving regulatory landscape across industries can be demanding.
• Building Credibility and Trust: Establishing a foothold in new sectors demands building trust and a solid reputation.
• Customising Tools and Platforms: New sectors mean new needs, necessitating tool customisation.
• Proving Value Proposition: Demonstrating ROI in unfamiliar terrains requires tangible metrics and case studies.
• Adjusting Business Models and Pricing: New industries mean new business patterns, requiring changes to pricing and business models.

Challenges Faced By Clients Adopting Multi-Vertical Regtech

Adopting new technology comes with inevitable challenges. Here we outline a few:

• Evaluating Solutions: Navigating through multiple Regtech vendors to find the right fit can be overwhelming.
• Integrating With Legacy Systems: Integrating with existing systems in most firms is complex due to compatibility issues. Ensuring seamless interaction between different Regtech tools and existing systems is a challenge.
• Data Consistency, Quality, and Overload: Embracing Regtech often illuminates issues with inconsistent data quality, posing a challenge to performance and compliance.
• Complex Deployment and Implementation: Some Regtech solutions demand extensive changes, leading to complex deployments.
• Cultural and Mental Shift: Employees might resist technology-driven compliance. Overcoming this requires effective change management.
• Third-party Risk: Integrating third-party solutions introduces risks, including data security and reliability concerns. Rigorous due diligence is essential.
• Skill Gaps: Securing and developing expertise to implement and manage Regtech is challenging.

Securing Top RegTech Talent

In addressing these challenges, acquiring and developing new skills often emerges as the key to the solution. The growing scope of Regtech is set to generate sustained demand for skilled professionals. While current Regtech expertise primarily centres around Financial Services, there’s a notable scarcity of experience in emerging verticals.

The crux lies in securing and nurturing talent with a dual proficiency: industry-specific regulatory knowledge and an adept grasp of applying Regtech to ensure compliance. This strategic blend will be pivotal in navigating the intricate intersection of evolving industries and technology-driven regulation.

In-Demand Roles:

• Legal & Compliance: specialising in regulatory frameworks for their specific industry vertical.
• Risk Management: Risk analysis skills tailored to new sector needs and regulations.
• Engineering: Developers with expertise in systems integration and Regtech stack proficiency.
• Data Science: Analytics talent to derive compliance insights from large, disparate datasets using AI/ML.
• Consultants: Change Management experts to drive adoption.
• Sales: Professionals experienced in selling Regtech solutions into new verticals.

Required Expertise:

• Compliance processes and regulations for specific verticals.
• Technical implementation and integration skills.
• Risk assessment capabilities aligned to vertical needs.
• Data engineering and advanced analytics proficiency.
• Communication and change leadership abilities.
• Understanding of customer needs and pain points in verticals and ability to articulate value propositions of Regtech by industry.

For long-term success, vendors and clients must prioritise talent development, knowledge sharing, documentation, change management, and cultural alignment across compliance, legal, technical, and data disciplines.

Conclusion

The expansion of Regtech beyond Financial Services into diverse industries signifies a transformative shift driven by the need for efficient regulatory compliance. While cross-sector applicability, revenue growth, and industry convergence fuel this evolution, challenges also arise.

Regtech vendors entering new sectors face hurdles like grasping new regulations, building trust, customisation, proving value, and adjusting business models. Clients adopting multi-vertical Regtech confront evaluating solutions, integration complexities, cultural shifts, data management, deployment challenges, skill gaps, and third-party risks.

Securing adept Regtech talent is vital, requiring a blend of industry-specific regulatory knowledge and technological aptitude. By securing and fostering professionals skilled in compliance, technology, risk assessment, and communication, both vendors and clients can navigate the intricate intersection of evolving industries and technology-driven regulation.

In conclusion, the Regtech expansion reshapes compliance innovation. With strategic approaches and collaboration, the fusion of regulatory compliance and technology will continue to shape industries profoundly.

eMFusion Global Takeaway

As Regtech expands its footprint into new verticals, the challenges of Talent and Change Management emerge as critical considerations for both vendors and clients.

Within this dynamic landscape, recruiting professionals who possess both domain expertise and technical proficiency becomes a paramount requirement for industries adopting Regtech.

By partnering with specialised recruiters well-versed in the intricacies of Regtech, such as eMFusion Global, acquiring the sought-after combination of compliance, legal, engineering, analytics and sales talent becomes streamlined.  These recruiters excel at identifying experts capable of facilitating the seamless development and integration of these innovative tools.

Ready to navigate the evolving landscape of Regtech expansion? Contact our experts at eMFusion Global to discover how we can help you secure top RegTech talent and navigate the challenges of multi-vertical adoption.