What is RegTech? | McKinsey
Published 11 Aug 2025 · McKinsey & Company · Andreas Kremer
Overview
RegTech, short for regulatory technology, refers to technologies that enhance compliance and risk management processes in financial institutions. The need for RegTech arose post-2008 financial crisis, driven by complex regulations like the Dodd-Frank Act and Basel III.
Key Insights
- Regulatory Penalties: In 2024, banks paid $19.3 billion in penalties, emphasizing the need for effective compliance solutions. This figure is independently verifiable.
- RegTech Growth: The RegTech market is expected to grow by up to 14% until 2028, driven by complex regulations and digitalization. This projection is based on McKinsey's analysis.
- Compliance Improvement: A US bank improved its compliance rate to over 95% by implementing a RegTech solution, reducing reliance on manual processes and external legal services.
BFSI Relevance
- Why Relevant: RegTech is crucial for managing compliance and risk in financial institutions, reducing penalties, and improving efficiency.
- Primary Sector: Banking
- Subsectors: Retail Banking, Corporate Banking, Risk Management
- Actionable Implications:
- Invest in RegTech solutions to automate compliance processes.
- Focus on improving data quality before deploying RegTech.
- Consider specialized solutions for specific regulatory needs.
executive article banking regulatory-and-standards global