Ireland now has a world class regulatory technology sector 

The market is growing at over 20pc a year, led by demand from the Asia-Pacific region

Hong Kong is one of those 'hot' Asian markets. Photograph: Leung Cho Pan

Mo Harvey

The Irish fintech sector has long been dominated by the payments industry but there is one sector in particular that has been quietly achieving great heights globally and without much fanfare until now – ‘regtech’, the short name for regulatory technology.

Often overlooked as a sector as it is not consumer-facing, Regtech has been steadily growing in sophistication and applicability. So, what is it? There are varying definitions out there but, at its core, it is the use of new technologies by institutions, banks, insurance companies or any regulated entity to meet regulatory compliance challenges in a more efficient way. It transforms risk management and compliance functions and enables companies to strategise and grow while complying with even the most complex regulations.

Ireland is an important centre for international financial services with a high-quality talent pool working in legal, risk and compliance functions. Currently, regtech is the largest indigneous fintech sub-sector and it is bubbling with promise.

Global regtech market

Regtech is the unsung hero of the fintech sector. Pre-pandemic, the global regtech market was predicted to grow from $6.3bn (€5.3bn) in 2020 to $16bn by 2025, a rate of over 20pc per year, with Asia-Pacific accounting for the highest growth rate over this period. However, Covid-19 caused an acceleration in adoption in tandem with a fintech boom so the market could be worth $30bn by 2025.

Market and industry drivers such as the 2008 financial crisis, increasing regulatory enforcement actions and fines, proactive regulators encouraging regtech adoption, digital banks, payments and lending, virtual assets and remote onboarding are just some of the contributing factors that have created opportunity for specialised solutions.

Regtech adoption is mature in Europe and the USA but Asia-Pacific presents an interesting opportunity for regtech companies. It is a uniquely fragmented region of developed and developing markets, with a number of sophisticated financial ecosystems and complex regulatory environments.

Expanding the Irish regtech footprint

Enterprise Ireland began its Asia-Pacific wide regtech initiative over 3 years ago and has just released its ground-breaking report on The State of RegTech in APAC. The report has even garnered support from all the key fintech ecosystem players throwing their weight behind it – from the APAC Regtech Network and The Regtech Association of Australia to the Fintech Associations of Singapore, Hong Kong, Japan and Malaysia.

We could see an increasing number of regtech companies coming out of Ireland and an alignment in terms of potential and opportunity in Asia-Pacific. What started as an exclusive market research for Irish regtech companies to help them understand the nuances of the region has now become the authority on regtech in Asia-Pacific.

Consequently, people are starting to take note of what Irish regtechs have to offer out here.

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Last but not east

Right now, we have a perfect storm of opportunity. Regtech adoption in Australia is well-advanced but it is at a relatively early stage in the Asian banking market with opportunities for further growth.

While many banks have started using regtech, most commonly in financial crime, regtech is employed in a low percentage of risk management and regulatory compliance activities. However, the breadth of regtech adoption is expected to increase over the next year, especially in the areas of conduct, customer protection, regulatory and tax reporting, and regulatory compliance obligations.

In addition, we are seeing regulators in key markets such as Australia, Singapore, Hong Kong and Japan, all encouraging the adoption of regtech (some regulators going as far as incentivising banks to buy regtech solutions). So now is a good time for regtechs to start building at least one Asia-Pacific market into their expansion strategy.

Ireland’s regtech cluster of excellence

Enterprise Ireland’s strategy is to make Ireland’s regtech cluster synonymous with excellence. There are a number of Irish companies already enjoying global success including Fenergo, Vizor, Daon, Mycomplianceoffice and Know Your Customer, while AQMetrics, Cerebreon, Sedicii and DX Compliance are gaining international traction. Hopefully more can follow in their footsteps.

Marrying Europe’s position as a global leader in regulatory and compliance standards with Enterprise Ireland’s investment in innovative technology-driven companies has provided fertile soil for Ireland to have a world-class regtech cluster and support the imminent global regtech boom.

Mo Harvey is financial services & FinTech advisor for Enterprise Ireland in Hong Kong