The RegTech Revolution: Cutting Compliance Costs with Automation (2025)
Abstract
Over the last 10 years, compliance costs of financial institutions have risen steeply due to more stringent regulations, higher volumes of transactions and manual processes. Regulatory Technology (RegTech), which applies automation, analytics, and digitization to compliance, seeks to reverse this trend by enhancing Know Your Customer (KYC) onboarding, anti-money laundering (AML) monitoring, trade reporting, and other aspects of risk control. In this respect, this article presents original research on the degree to which RegTech can reduce compliance costs while providing the same or higher degree of effectiveness. In 2023, worldwide financial crime compliance expenditure surpassed $200Bn per annum, and banks are allocating as much as 10–15% of their operational costs to compliance. If you want to reduce operational risk, the false-positive alert in a way that involves high-volume tasks (customer due diligence & transaction screening) can be automated with over 50%, and the case handling time is reduced up to two to three times the limit by the help of end-to-end automation of certain tasks. We map its key processes - KYC, sanctions screening, transaction monitoring, trade reporting, model risk management - to their major cost drivers, and we highlight areas for automation that decrease manual hours, speed up turnaround times, and enhance the accuracy of risk detection. Use cases for banking, capital markets, insurance, and fintech have early adopters pointing to meaningful outcomes - weeks-long onboarding times are down to days in major banks, alert volumes are halved, and millions in annual compliance costs saved. It includes an ROI model that gives you formulas to compare baseline and automated costs, and reports payback periods of under 3 years. The findings show that RegTech can create a major shift in efficiency, allowing institutions to do more while spending less on manual compliance. This lets them focus more on real risk management without reducing effectiveness or adding new risks.
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