How Can the UK RegTech Sector Sustain Its Long-Term Growth Potential?
Surging compliance demands and evolving regulations have catapulted the UK’s RegTech sector onto the global stage, with no sign of slowing down.
According to the United Kingdom Regulatory Technology Business Report 2024-2029, the industry is on track to reach US$657.84 million in 2024, growing at an annual rate of 24.9%.
Yet this impressive growth merely skims the surface of a far bigger story.
As regulatory scrutiny tightens and global complexities deepen, the UK’s RegTech community finds itself at a pivotal juncture.
The question is no longer whether RegTech will thrive, but how the sector can sustain its remarkable momentum over the long term.
Looking to accelerate your RegTech footprint in the UK’s dynamic financial services sector? Lagom Consulting can help you capture new market opportunities and turn challenges into growth. Reach out today to discover how we can support your expansion journey.
A Rapidly Maturing Market
From anti-money laundering (AML) tools to automated reporting platforms, RegTech has shifted from a niche set of point solutions to a broad ecosystem offering end-to-end compliance services. The evolution from RegTech 1.0—where technology vendors addressed singular problems in isolation—to RegTech 2.0, as described in UK Finance’s article ‘Deriving Value from the Evolution of RegTech 2.0’, has led to more holistic, scalable services. This next generation places an emphasis on interoperability with existing compliance architectures, advanced data analytics, and proactive risk management.
Such maturity is evidenced by growing investment activity.
In Q3 2024 alone, the Global RegTech sector recorded 71 transactions, a 37% drop from Q3 2023 but a 20% increase on Q2 2024, according to the Key Global RegTech Investment Stats in Q3 2024. While total RegTech funding in that quarter fell to US$854 million—a 58% drop from Q3 2023—there are indicators that the market is still recalibrating after macroeconomic uncertainties.
Meanwhile, UK-based RegTech companies are gaining an outsized share of deal activity: the UK secured 30% of the top 10 deals globally in Q3 2024, suggesting that the local market is well placed to weather short-term headwinds.
Why is the UK a Fertile Ground for RegTech
The UK has developed into a RegTech powerhouse for several reasons:
Robust Regulatory Ecosystem
Institutions like the Financial Conduct Authority (FCA) actively encourage innovation. The FCA’s regulatory sandbox offers a ‘safe space’ for RegTech firms to test solutions with real consumers and under direct regulator oversight. This collaborative approach not only bolsters trust but helps technology providers refine their products in line with genuine market needs.Concentrated Financial Hub
London’s status as a global financial centre provides easy access to banks, asset managers, and other financial services institutions. The proximity of potential clients, partners, and investors accelerates the adoption lifecycle of emerging RegTech solutions.Forward-Thinking Policy Framework
Initiatives like the Consumer Duty are pushing firms to demonstrate robust compliance in near real time. Such regulatory pressure fuels demand for advanced solutions—be it for real-time transaction monitoring or automated reporting systems.Growing Talent Pool
Drawing on over 3,000 fintech companies headquartered in London and hundreds of foreign banks, the UK has a strong pipeline of experienced professionals capable of bridging the gap between regulatory requirements and cutting-edge technology.
Sustaining Growth: Key Strategies
Despite favourable conditions, maintaining the UK’s long-term RegTech growth will require strategic thinking and collective action from industry, regulators, and government. Below are six pillars that can underpin sustained expansion.
1. Foster Deeper Collaboration
As emphasised in the UK RegTech Success Stories Report (August 2024) published by the City of London Corporation, collaboration is a linchpin for unlocking value in the RegTech ecosystem. Real-world case studies show that partnerships—whether between start-ups and established financial firms, or between vendors and regulators—have expedited solution development and boosted market adoption.
Industry-Driven Forums: Establish more specialised working groups focusing on issues like financial crime, ESG compliance, or AI ethics. Such forums can encourage knowledge-sharing, support standardisation, and advocate for stronger government backing.
Regulatory Engagement: Proposals like the RegTech Test—an initiative advocated by Innovate Finance—demonstrate how the policymaking process can benefit from industry input on how new rules impact compliance technology.
2. Invest in AI & Cloud Automation
Several reports, including the Grant Thornton RegTech and Regulatory Change Report 2024, point to artificial intelligence (AI) and cloud computing as top priorities for financial institutions. AI-driven compliance can automate laborious tasks, from horizon scanning to dynamic risk assessment, while cloud-based systems lower operational overhead and facilitate scalability.
AI for Real-Time Monitoring: According to the Global RegTech Business Report 2024-2029, machine learning and natural language processing are increasingly pivotal for tasks like transaction scrutiny, sanction screening, and regulatory intelligence. By proactively detecting anomalies, firms can tackle issues before they become regulatory breaches.
Cloud as an Enabler: With data volumes skyrocketing, cloud-based solutions are crucial for cost-effective storage and rapid processing. They also offer real-time updates, ensuring continuous compliance even as regulations evolve.
3. Enhance Training & Talent Development
In the RegTech and Regulatory Change Report 2024, 71% of firms felt their employees are adequately trained to adopt new regulations, but a further 86% saw room for improved interdepartmental communication on compliance. Skills shortages in areas like data science, AI engineering, and regulatory interpretation can stifle innovation.
Upskilling Initiatives: Public-private partnerships could create specialised certification programmes that blend regulatory knowledge with technical expertise. This approach helps build a pipeline of ‘RegTech generalists’—professionals adept at bridging compliance and technology.
Cross-Functional Collaboration: Encouraging interactions among compliance officers, IT specialists, and business unit leaders fosters a shared language, enabling more integrated solution development and uptake.
4. Maintain Strong Government & Regulatory Support
The UK’s regulatory openness is frequently cited as a key advantage over other markets like the US or Singapore. The FCA and PRA’s forward-thinking stance promotes innovation, yet a cohesive national strategy can further cement the UK’s lead.
Financial Incentives: Emulating countries such as Australia and Singapore by providing grants or tax incentives for RegTech R&D could boost local start-ups.
Clarity in Regulation: As new areas like cryptoassets and AI become regulated, timely guidance will help firms pivot quickly to maintain compliance. The upcoming expansions in crypto regulation underscore how clarity can fuel or impede market growth.
5. Promote Interoperability & Standardisation
One barrier to broader RegTech adoption is fragmented data formats and inconsistent regulatory reporting standards. It is critical that the sector evolves towards interoperability and consistent data frameworks to unlock economies of scale.
Common Data Models: Encouraging the use of uniform taxonomies ensures solutions can be scaled across different business units and jurisdictions.
API Standardisation: Secure, standardised APIs allow data to flow seamlessly between financial institutions, RegTech vendors, and regulators. This reduces integration costs and maximises the benefits of automation.
6. Embrace a Holistic Compliance Mindset
A narrow, reactive focus on plugging individual regulatory gaps can lead to overlapping systems, inefficiencies, and missed opportunities. As highlighted in Deriving Value from the Evolution of RegTech 2.0, many of the most successful deployments treat RegTech as part of a comprehensive compliance strategy.
Enterprise-Wide Integration: Rather than procuring distinct tools for each regulatory requirement, institutions should invest in platforms that unify data across departments—risk, finance, legal, and IT. This lowers overall costs and improves real-time visibility.
Governance & Cultural Alignment: Tools alone cannot ensure compliance; they must align with robust governance structures, clear accountability, and supportive corporate culture. Senior leadership buy-in remains paramount to drive continuous improvement in compliance.
Looking Ahead: Beyond 2025
While the next 11 months will see a continued focus on advanced AI solutions, standardised data initiatives, and the roll-out of new regulations such as the Future Approach to Policy (DP4/22) for digital assets, the horizon points towards even greater transformations.
The Global RegTech Business Report 2024-2029 predicts the global sector will reach US$35.41 billion by 2029, with a compound annual growth rate of 16.6%. For the UK, which already accounts for a substantial share of RegTech innovation, there is a tangible opportunity to cement its global leadership.
Sustaining this potential will depend on how well industry players orchestrate strategic partnerships, manage talent shortages, and harness emerging technologies.
Collaborative forums like the City of London Corporation’s engagement initiatives, Innovate Finance’s calls for a RegTech Test, and the FCA’s evolving regulatory sandbox will serve as catalysts. At the same time, ongoing alignment with global standards in areas like fraud detection, cyber resilience, and ESG reporting can open new markets and enhance competitiveness.
Conclusion
The UK RegTech industry sits at a crossroads of both promise and responsibility. Regulatory bodies, technology innovators, and financial institutions must collectively shape an environment conducive to agile, long-term growth.
By championing collaboration, investing in AI and cloud-based solutions, developing talent, clarifying regulations, standardising data, and adopting a holistic compliance lens, the UK can maintain its trajectory as a global RegTech leader. The stakes are high—but so are the rewards for those that seize the moment and chart a sustainable path forward in an increasingly complex regulatory world.
If you’re a forward-thinking RegTech firm striving to gain traction with financial services clients—and looking to unlock sustainable growth—Lagom Consulting stands ready to guide you every step of the way.
As a specialist growth consultancy, we help RegTech innovators build targeted strategies, forge strong industry partnerships, and navigate complex compliance landscapes with confidence.
Start your growth story now: contact Lagom Consulting to learn how our proven expertise can position you at the forefront of the UK’s thriving RegTech market.
Your Growth Strategy Starts Here with Lagom Consulting
As the UK cements its reputation as a global hub for business innovation, the opportunities for growth have never been greater. The FCA’s new Private Intermittent Securities and Capital Exchange System (PISCES) offers a structured pathway for businesses to align with one of the most respected financial markets worldwide—ensuring compliance while fostering innovation.
However, navigating this evolving framework requires deep expertise and strategic insight. That’s where Lagom Consulting comes in.
We specialise in helping innovative firms and entrepreneurs unlock their full potential in the UK market. By leveraging our in-depth understanding of the FCA’s regulatory approach, we provide:
Tailored market entry strategies that position your business for success in a competitive environment.
Compliance solutions that meet the highest standards, ensuring your firm gains credibility in this trusted jurisdiction.
Strategic guidance to help you adapt to regulatory changes while capitalizing on innovation-friendly policies such as the Digital Securities Sandbox and now PISCES.
Whether you’re a global firm exploring expansion or a UK entrepreneur building the next big venture, Lagom Consulting is your partner for navigating challenges and seizing opportunities.
Let’s turn regulation into a growth catalyst. Contact us today to shape your future in the UK’s fast-evolving financial markets—where innovation, compliance, and opportunity converge.