As regulatory complexity escalates, RegTech-as-a-Service (RaaS) emerges as a game-changer, with the global RegTech market expected to soar from $15.8 billion to $70.8 billion by 2033 at an 18% CAGR, according to research from IMARC Group. Harnessing AI, cloud computing, and automation, this model delivers scalable, real-time compliance solutions, slashing costs and boosting agility for financial institutions. The critical question: Could RaaS redefine the future of agile compliance?
For Supradeep Appikonda, COO and co-founder of RegTech firm 4CRisk.ai, RaaS is indeed shaping the future of agile compliance, powered by specialised language models.
He said, “By delivering scalable, cloud-native, and AI-driven compliance capabilities on a subscription basis, RaaS enables organizations to rapidly adapt to evolving regulations without heavy upfront investments. It offers flexibility to customize solutions modularly, seamless updates, and continuous access to the latest regulatory data and analytics. This model accelerates time-to-value, reduces operational burden, and empowers firms to maintain compliance agility in an increasingly complex regulatory landscape.”
In the view of Appikonda, RaaS enables firms to adapt quickly to evolving regulatory requirements by providing cloud-based, modular compliance solutions that ae continuously updated with the latest regulatory data and AI-drive analytics. This, he claims, eliminates the need for costly, time-consuming software upgrades or manual research.
“With real-time horizon scanning, automated impact assessments, and seamless integration via APIs, RaaS delivers instant visibility into new obligations and risk areas. Firms can rapidly adjust their compliance programs, policies, and controls to stay ahead of regulatory change with minimal disruption,” said Appikonda.
What benefits does a modular, subscription-based compliance model offer over traditional systems?
Appikonda remarked, “Modular, subscription-based compliance models offer several advantages over traditional systems. Advantages include cost efficiency with pay-as-you-go subscriptions, faster deployments, continuous updates to reflect the latest regulatory changes without manual intervention, seamless Integration using APIs and agility where the modular design allows firms to quickly add or modify capabilities in response to evolving regulatory demands.”
When considering how FIs overcome integration challenges with legacy infrastructure, Appikonda said that FIs are adopting API-first, modular RegTech solutions and introducing agent-based orchestration where it makes sense.
He said, “AI agents can autonomously perform a series of compliance tasks such as monitoring, mapping, and flagging issues by leveraging data from both legacy systems and modern AI-powered modules. With Human-in-the-Loop reviews at critical steps, agentic orchestration ensures accuracy and oversight while accelerating workflows. Combined with APIs, middleware, and phased implementation strategies, this approach allows institutions to modernise incrementally, maintain auditability, and bridge old and new technologies without costly overhauls.”
Meanwhile, what risks and governance concerns come with the outsourcing of compliance functions to third-party providers?
Here, Appikonda waxes that outsourcing compliance to third-party providers introduces ‘critical risks and governance concerns’ that must be actively managed, especially when AI is involved.
He said, “Key risks include loss of control, data security, regulatory accountability, and vendor reliability. Importantly, regulators still hold the institution responsible for compliance outcomes. To mitigate these risks, firms must hold third-party providers to the same standards they enforce internally. This includes ensuring AI vendors can explain their algorithms, demonstrate proof of compliance with your internal rulebook, and provide full transparency into decision-making.”
Without explainability, Appikonda remarked that trust breaks down particularly when false negatives or missed obligations occur.
“Third-Party Risk Management teams and enterprise architects must actively govern external providers, identifying weak links and exposures in the extended compliance ecosystem. Interestingly, AI can play a powerful role here: it can analyse unstructured documents like SOC 2 reports, audit findings, SLAs, and assessments, flagging compliance gaps, highlighting deviations from internal IT or contracting standards, and even recommending actions to close those gaps,” said Appikonda.
What traditionally took days, AI-enabled RegTech can now handle in minutes, claims Appikomda, significantly strengthening third-party oversight. “In short, outsourcing compliance requires strong governance, AI transparency, and proactive TPRM with focus on not just contracts, but intelligent, explainable, and auditable systems embedded into the enterprise compliance fabric,” he said.
Swift adaptation
RegTech firm Taina Technology took the time to stress that RaaS enables firms to adapt swiftly to changing compliance landscapes through several key areas.
The company used an example of automated validation and reporting. “Real-time validation of investor tax forms across multiple jurisdictions ensures firms stay compliant with tax regimes of FATCA and CRS requirements without manual intervention,” explained the firm.
Another area was centralised oversight – with Taina stating that RaaS platforms provide consistent, audit-ready documentation and centralised control, allowing firms to respond quickly to audits or regulatory inquiries.
It also provides dynamic updates and scalable infrastructure. “These platforms are continuously updated to reflect new regulatory requirements, such as jurisdiction-specific deadlines and reporting formats.” On the latter, Taina outlined that RaaS supports complex fund structures and multi-jurisdictional operations, allowing firms to expand without being constrained by legacy systems.
Taina also believes that a modular, subscription-based model offers several advantages.
Firstly, in cost efficiency, “Firms avoid large upfront investments and instead pay for only the features they need, scaling usage as their operations grow.”
Flexibility and rapid deployment are also key. On the first point, Taina said that modules can be tailored to specific fund structures, jurisdictions or compliance needs, enabling firms to adapt without overhauling their entire system.
On the latter, Taina said that subscription models often come with cloud-based infrastructure, enabling faster implementation and updates compared to traditional on-premise systems.
The last area is in continuous improvement, “Vendors regularly enhance features based on regulatory changes and client feedback, ensuring firms remain compliant and competitive,” said Taina.
How are financial institutions overcoming integration challenges with legacy infrastructure?
Taina said, “Large institutions biggest challenge with legacy infrastructure is the cost of unwinding outdated systems or processes and then implementing the modern/future options. Once they have sufficient resources, financial institutions can better address integrating with legacy systems.”
Some of these options include API-driven connectivity. “Modern platforms like TAINA offer APIs that integrate with existing fund administration and investor portals, reducing disruption,” said the company.
Also, OCR and form digitisation, role-based workflows and intermediary visualisation tools play key roles for Taina.
The risk and governance concerns surrounding outsourcing compliance range from data security and privacy, regulatory exposure, audit readiness and oversight and control for Taina.
On the first and second point, the firm said, “Handling sensitive investor information across jurisdictions requires robust data protection measures and clear accountability.
Firms remain ultimately responsible for compliance, even when using third-party platforms. Misreporting or failure to meet deadlines can result in fines and reputational damage.”
For audit readiness, Taina stressed that outsourced platforms must maintain detailed audit trails and classification logic to satisfy increasing scrutiny from tax authorities.
Oversight and control is also key. “Firms must ensure that service providers follow internal policies and regulatory standards, often requiring a designated Responsible Officer or compliance lead,” said Taina.
Helping to adapt
In May 2025, the Central Bank of Nigeria published a draft on baseline standards for automated AML solutions, with the draft underlining what the Central Bank believed to be essential parts of KYC/AML solutions.
Michael Thirer, chief legal officer at Muinmos, said that the first criteria the CB noted down is the solution should be configurable ‘to allow for rule updates and scenario modifications with minimal vendor dependency’. This means a compliance solution should help the financial institution adapt to new regulations, and not become a hindrance from making those adaptations.
“This is something that we very much agree with at Muinmos, and we built our AI-powered Platform around that principle. Unsurprisingly, 86% of our clients stated they are using us to support their global expansion and compliance,” said Thirer.
He continued, “And this highlights another key benefit of a true SaaS RegTech – enabling institutions to easily acquire new markets and offer new products. In our case, for example, not only the solution is highly configurable; it also updates according to the prevalent regulatory framework, helping institutions to comply without them needing to change every part of the compliance process.”
The benefits of a modular, subscription-based compliance model for Thirer center around scalability.
“Modular, subscription-based compliance systems offer the ability to scale up without having to ramp up internally, providing operational flexibility which is very important in financial markets these days, especially in the investments and crypto sectors,”
According to Thirer, many of Muinmos’ clients gain new licences as they become available in new jurisdictions or move from one jurisdiction to another due to demand and market conditions.
He said, “Using our AI-powered Platform, they can do so with very minimal configuration changes, practically within the day. That is what true SaaS-native RegTechs provide – the ability to scale and adapt without needing to worry about the back-office changes.”
What risks and governance concerns come with outsourcing compliance functions to third-party providers? On this, Thirer states that Muinmos finds third-party providers improve risk management and governance in many cases.
“For example, in our case, we hold the institution’s application, their client data etc. – all in one environment, ISO certified and GDPR compliant. This gives our clients one less thing to worry about – they know their data is safe,” said Thirer.
A clear shift
Arctic Intelligence CEO Anthony Quinn remarked that the company is seeing a clear shift occurring – businesses don’t just want compliance tools, they want compliance outcomes delivered in a faster, more flexible way, enriched with expert developed content.
He said, “Today, the average compliance officer is barely able to keep their head above water – new and changing regulations occur daily, across multiple regulatory bodies and risk domains – to try and manage this manually or without technology is simply unsustainable and frankly asking for trouble.”
It is still surprising, Quinn remarks, hearing people in the risk and compliance functions considering in-house technology builds, which Quinn believes makes ‘zero commercial or practical sense’ and the time to design, develop, test, release and maintain is often prohibitive and requirements might be only from their organisation-centric view as opposed to evolving innovative features based on the minds of many.
“Added to that the economic total cost of ownership of in-house built solutions wouldn’t be 10-50x the cost of an annual license, so actually makes no sense whatsoever – but this doesn’t stop people from trying (and often failing having wasted their time and their organisations money),” said Quinn.
The Arctic founder also said that the benefits of RegTech are ‘unquestionable’ – with systems often modularised, agile, flexible, scalable and more interconnected.
“But let’s be clear – Firms still need strong governance, transparency and oversight of RegTech providers as regulators expect businesses to understand and control what’s “in the box” even if the function is delivered externally. The winners will be those that balance speed and efficiency with governance and accountability,” finished Quinn.
Fast-changing patterns
According to Madhu Nadig, CTO of Flagright, RaaS works because regulations and attacks patterns change faster than on-prem systems are able to.
He said, “A subscription model with modular services lets firms switch on new controls, ingest new data sources, and meet new reporting formats without multi quarter projects. The benefits are time to value, continuous updates, and opex alignment.
“The practical hurdle is legacy integration. Institutions that succeed use a strangler pattern: run the new service alongside the old, mirror the same data and decisions, compare outputs for a fixed period, then cut over when parity is proven. Lightweight adapters, clear SLAs, and parallel run plans make this boring in the best way.”
Despite this, Nadig stressed that outsourcing does not remove accountability. RaaS introduces third-party risk, data residency questions and potential lock-in.
He said, “You manage that with encryption and key control, explicit audit rights, documented exit plans, and evidence that maps directly to each obligation. Shared responsibility must be written down and tested, not assumed. Our view at Flagright is that RaaS is viable when the provider gives you transparency into models and policies, not just APIs, and when your team can override or explain any automated decision on demand.”
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