2024 was a pivotal year for regulatory technology (RegTech) in financial services, with several key advancements and trends driving change in the industry. GenAI played an important role in automating compliance processes, while many pushed towards the standardisation of data to boost transparency, reduce costs, and improve accuracy. Ahead of FStech’s RegTech Live conference, taking place on 27 February at the London Hilton, Tower Bridge – senior reporter Silvia Iacovcich speaks to industry experts, including several speaking at the event, to investigate the latest RegTech trends, risks and predictions for 2025.

As financial institutions face the increasing pressure of regulatory change, including the roll out of new policies such as the recently launched Digital Operational Resilience Act (DORA), finding the right approach to RegTech has never been more crucial for firms in the market.

And while the rise of advanced technologies like genAI has provided new tools to support regulatory compliance, it has also delivered a new way for malicious actors to perpetrate fraud or cyber-attacks.

This article explores the key trends, risks and expectations for financial services institutions in 2025, examining how they are navigating this challenging regulatory environment with the latest technology.

GenAI at the forefront of RegTech 

In the first month of 2025, AI continues to steal the spotlight in the RegTech space.

“We are seeing genAI really take shape and enter the mainstream, being adopted by many RegTech vendors in their product roll outs. Respondents to our recent survey are predicting that genAI will have significant impact on RegTech over the next two years,” says Deborah Young, chief executive at the RegTech Association.

The organisation’s report, published earlier this month, finds that over 73 per cent of respondents from a cross-section of industries including RegTech buyers, sellers and regulators, believe that genAI is already or likely to substantially transform the RegTech landscape within the next one to two years. The technology is being used to advance product development and deployments, with regulatory compliance; addressing operational fraud and scams; and AML/CTF among its top applications. 

According to the RegTech Association’s study, machine learning (adopted by 62 per cent), natural language processing (50 per cent), and open-source tools (43 per cent) are gaining traction.

Young notes that regulators are also increasingly adopting their own RegTech solutions, known as supervisory technology (SupTech), with the report demonstrating that 76 per cent of vendors in this space expect growth in the next two years.

Big Data and machine learning are widely found in SupTech applications used by financial authorities, with 47 per cent adoption. 

Real-time compliance

With the study showing that the financial industry is the top sector adopting RegTech, it is no surprise that financial services firms are using the advancement of AI and advanced technologies in the space to automate and streamline compliance processes.

Teresa Walsh, managing director of the EMEA region at FS-ISAC’s Global Intelligence Office, points out that the regulatory environment has become increasingly complex and globally interconnected, with regulations like the EU’s newly launched Digital Operational Resilience Act (DORA) standardising operational resilience requirements. 

“RegTech is adapting by providing modular, scalable solutions that cater to different jurisdictional needs,” she explains.

Automation is becoming a cornerstone of compliance efforts, with institutions investing in end-to-end reporting systems that not only generate reports but also analyse trends and identify risks in real-time.  

Samar Pratt, global financial crime compliance advisory leader at Capgemini highlights this shift: “The reliance on traditional, on-premise compliance systems have diminished. Cloud-native and hybrid solutions, offering better scalability, lower costs, and faster updates, have taken precedence. On-premise systems are now seen as too rigid to keep pace with evolving regulatory requirements and the rapid proliferation of digital assets.”

Walsh emphasises the growing importance of real-time compliance, which helps to support transparency and risk mitigation demands, with advanced analytics and machine learning further enabling real-time monitoring, reporting, and decision-making.

“GenAI is further revolutionising workflows by identifying compliance gaps proactively,” she explains.  

According to Imran Akhtar, RegTech consultant at The Global RegTech Summit, regulatory reporting demands will continue grow, with emerging technologies that enable faster data processing and cleansing will be instrumental in achieving real-time compliance.

“Real-time compliance has always been the ‘dream and the vision’ for the industry, as it allows for immediate action and remediation, rather than delayed responses,” Akhtar explains.  

A holistic approach

A more fragmented global regulatory landscape and a surge in cost and complexity is also driving a more holistic approach, visible in the way firms are approaching RegTech systems, according to Capgemini’s Samar Pratt.  

“The siloed approach to FCC systems, for example, has lost traction,” she says. “Institutions are prioritising integrated platforms that combine KYC, AML, sanction screening, and fraud detection into a single, seamless workflow.

“This holistic approach better aligns with regulators’ expectations and boosts operational efficiency and effectiveness, with the benefit of reducing total cost of operations.”

Third parties

FS-ISAC’s Teresa Walsh notes that recent regulatory rollouts like DORA include detailed requirements regarding critical third-party providers, driving a growing focus on building operational resilience through third-party risk management.  

RegTech specialist Akhtar believes that financial firms will increasingly outsource their RegTech needs rather than building everything in house.

“Outsourcing can be expensive, but with the increased investment and better financial conditions in 2025, companies will be able to afford to outsource more of their RegTech requirements,” he says.

He contrasts the prediction with a current tight budget environment, where companies are focused on doing the "bare minimum" when it comes to regulatory compliance. 

AI training

Akhtar foresees ‘a point no return’ where AI-trained employees become a crucial feature of their organisations, leading to significant team restructuring.  

“The need for large, specialised teams will diminish, as the specialisation will be embedded in the AI systems,” he continues. “Instead, we will see the emergence of smaller, more versatile teams that can leverage the capabilities of AI.”

But some in the financial services industry are approaching AI-training in a more holistic way, where the entire organisation is prepared to harness AI. With this approach everyone can be involved to ensure data safety, security, and compliance.

Fraud detection 

Fraud prevention and scam detection remain top priorities for RegTech, alongside traditional financial crime. Young points to the growing threat.

“At this stage, we see fraud and scams joining its cousin financial crime in the top risks addressed,” she says. “The scourge of scams is real and is impacting consumers every day.

“No one is safe, and the impacts can be devastating.”

She says that institutions are investing to protect customers and their data because of the increasing risks in cybersecurity, financial crime and fraud.

There is also the growing threat of fraudsters using the latest technologies, including genAI, to facilitate these increasingly advanced scams and cyber-attacks.

Capgemini’s Pratt notes that generic fraud detection tools are losing relevance as the industry moves toward specialised solutions tailored to specific threats, which can also include the latest advanced technologies.

“Institutions now demand tools with greater precision and flexibility, reducing the appeal of one-size-fits-all fraud detection software,” she adds. 

From a regulatory perspective, there is focus on ensuring the responsible and ethical use of AI, while also using technology such as genAI and predictive analytics to provide better protections and benefits for customers in the financial services industry.

Although challenges in the compliance arena remain, as financial institutions find their feet with new regulations and face heightened pressure from increasingly sophisticated fraud incidents and cyber-attacks, advancements in technology, the rollout of real-time compliance, and a holistic approach will help firms navigate the complexity of today’s regulatory landscape.

Looking ahead over the coming 12 months, financial services providers will likely be focusing their efforts on expanding the use cases and capabilities of AI-driven RegTech; prioritising fraud detection; getting to grips with newly launched regulation; continuing to automate and streamline regulatory processes; and ensuring their teams are trained on the latest AI technology.

To find out more about the technology and methods firms across the financial services space are using to address the latest regulatory expectations, register to attend FStech’s RegTech Live now! The conference is taking place on 27 February at the London Hilton, Tower Bridge.

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