London takes top spot in RegTech deals: FinTech Global

In a new research, specialist data and intelligence firm FinTech Global has found that London is set to lead dramatic growth in the regulatory technology industry.

Regulatory technology, popularly called “RegTech”, is defined as a class of software applications for managing “regulatory compliance”. 

According to FinTech Global, investments in RegTech companies have grown by 38.5% (CAGR) over the last five years. Last year, a record $678m was invested in 70 companies, compared to $185m in 32 companies in 2012. Q1 was a record quarter in terms of deals completed (21) whilst Q3 was a record in terms of volume ($305m).

“London takes the tops spot for the city with the most RegTech deals with 39 investments between 2012 and 2016. The next six locations in the city rankings are based in North America. Dublin and Paris are the only other European cities to appear in the top ten”, it said.

According to the research, backing for anti-fraud companies overtook compliance-focused companies last year, with investments in companies in the anti-fraud sector jumping from $82.2m in 2014 to $334.8m in 2016. As a subsector of RegTech, it has increased from 14.1% of all investments to 49.4% in 2016.

The UK Financial Conduct Authority (FCA) has created a ‘regulatory sandbox’, in which fintech and regtech startups can experiment with emerging technologies without worrying over regulatory infringements. In November 2016, the FCA announced the firms that were successful in their applications to begin testing in the first cohort of the regulatory sandbox.

Speaking at the Westminster Business Forum, Bob Ferguson, head of department for Project Innovate at the FCA, said that RegTech has great potential, which is yet to be fully realized, according to Bridging and Commercial.

“We are there for everyone who is innovative and looks to be doing something to inject better competition into the UK market for financial services.

“If there are ways [of] using technology [to reduce] the expense and the challenge of complying with customer identification and customer due diligence, then I think it is really important that regulators should be open to the idea of these propositions and that the market should be able to generate ideas and to explore them with the regulators.

“So our work on RegTech will certainly also continue this year.”