Is RegTech entering its age of consolidation?
The RegTech sector has spent the past decade in a phase of rapid expansion, fuelled by regulatory complexity, investor enthusiasm and a constant stream of new compliance challenges. But after years of fast growth and a crowded field of specialist providers, signs point to a market shifting gears. Competitive overlap is widening, client expectations are rising, and investors are pushing for clearer paths to scale. Against this backdrop, an important question emerges for 2026: is RegTech entering its age of consolidation?
According to Corlytics CEO John Byrne, the RegTech market has moved from an early adopter, experimental phase to mainstream, where according to Mordor Intelligence the RegTech market in 2025 will be worth $20.67bn.
“As technology markets grow, many early-stage companies consolidate into fewer larger scale players. The regtech market is no exception,” he said.
For Byrne, there are three main drivers. First of all, is the ‘sheer complexity’ of the problem.
He explained, “A typical global bank can have up to 1,000 global regulatory bodies it needs to track, with up-to 300 regulatory changes or regulatory alerts per day. Regulators are expecting a high standard of “connectedness” in managing the regulatory lifecycle, for example aa regulatory change being correctly tracked and analysed, where regulations and obligations are correctly updated where necessary. “
Regulators, Byrne added, now also expect that this “connectedness” will expand into automated policy and controls updates, for example from regulatory monitoring to the implementation phases of the regulations.
The second driver for Byrne is that large financial institutions can have upwards of 10% of their staff involved in regulation after a period of heavy fines.
He said, “These regulated firms need to automate these expensive processes, in order to improve the effectiveness and efficiency of the overall compliance management process. Larger regtech solutions that manage the entire regulatory lifecycle help provide the outcomes that regulators are looking for; transform the implementation aspects of regulatory change management in terms of policies and controls from “months to minutes”. In addition to providing better outcomes, there are very significant cost advantages in terms of consolidation of regulatory information, FTE savings and reduction in risk.”
The third driver is that vendors are extensively using AI to provide all of the above benefits. There are already considerable regulatory considerations for large financial firms sourcing AI driven solutions. He said, “This AI regulatory burden will only increase as its use becomes more widespread. Any SaaS based vendor will need both ISO27001 and SOC2 as a minimum network security requirement. AI solution providers will need a minimum of ISO42001 certification and will need an expensive ML & AI operations capability. The IT and AI resources required to run large AI based RegTech systems that are in production globally can exceed the entire head-count of smaller vendors. These regulations and the additional DORA requirements are raising the barriers of entry, which is also forcing many smaller firms to consolidate with larger firms.”
How can smaller innovators survive in a market moving toward large, end-to-end solutions? On this Byrne believes smaller innovators can survive by partnering with larger players, as a pre-requisite they will need to support API’s (Application Programming Interface) from the main platform providers systems and will need an open data model that is easy to integrate into the enterprise framework of the bank.
Will consolidation create more efficient ecosystems — or stifle the creativity that made RegTech thrive? Here, Byrne said that the market is moving very quickly, driven by regulators expectations and firms need for greater automation. Lastly it is being driven by AI and what is technically possible. The market is moving from creativity to achieving tangible results at scale. Only scale players will be able to afford the investment required to stay ahead in this market.
Lastly, how might collaboration between vendors and financial institutions reshape the competitive landscape over the next five years?
Byrne said, “There is a lot of collaboration already between vendors and financial institutions, driven mainly by regulatory and efficiency pressure. Financial institutions expect vendors to provide target operating models and experience of what works best from other engagements to help them best solve problems. The market is moving to vendors being more solutions orientated, rather than product orientated.”
Shifting landscape
According to b-next, for years, the RegTech sector has been defined by innovation. Agile companies solved sharp, specialised compliance challenges better and faster than large enterprise systems ever could.
“But today, the landscape is shifting. We are seeing mergers, ecosystem partnerships, and the emergence of integrated platforms. The question is no longer whether RegTech is growing, but whether it has reached its consolidation phase,” the firm said.
Several forces are driving this shift, the company said. “Financial institutions are under pressure to streamline their compliance stack and reduce operational complexity. Regulators are demanding more transparency, explainability, and auditability across the entire lifecycle of risk and surveillance.”
At the same time, the company stated, the cost and difficulty of maintaining compliance infrastructure internally has pushed firms to look for scalable, end-to-end solutions rather than fragmented point offerings. The result is a market rewarding unified architecture over disconnected innovation.
“This raises an important question for smaller RegTech innovators. How do they survive a market that appears to be favouring scale? The answer likely lies in three strategic routes: deep specialisation in underserved domains, becoming indispensable through interoperability and open standards, or pursuing strategic alliances that embed their capability within broader compliance ecosystems. In many cases, collaboration rather than competition may become the strongest positioning strategy,” said b-next.
Will consolidation make the industry more efficient or slow innovation? Here, b-next believes the truth is that both forces will exist in parallel. Platforms will bring consistency, reduced cost of ownership, and enterprise governance.
“Yet the most disruptive thinking will continue to emerge from teams solving very specific, high-value problems. The challenge is ensuring that consolidation does not eliminate diversity of thought, experimentation, or agility,” said b-next.
The company concluded, “Looking ahead, vendor-to-vendor collaboration and coordinated product development with financial institutions may reshape the market more than acquisition alone. As banks and regulators increasingly expect RegTech solutions to be explainable, integrated, and AI-ready, partnerships will become the mechanism for scaling innovation responsibly.
“RegTech is not simply consolidating. It is evolving from fragmented tools into a connected ecosystem. Those who will thrive are the ones who understand that compliance is no longer about point solutions. It is about intelligence, interoperability, and trust, delivered at scale.”
RegTech innovation
Red Oak COO Kirsten Newbold-Knipp highlighted that new technologies and entrants are creating innovation in the RegTech space—all while incumbents are working to define how they adopt AI and refine solutions that are right sized and priced for their clients.
She added, “Just as the world of wealth management is seeing rollups of RIAs, the technology partners seek to build more end-to-end value for their clients. In many cases, it’s more feasible to buy or partner than build new solutions, but we expect to see a mix of both in the coming years.”
Newbold-Knipp added that the company is seeing a strong desire from its clients to collaborate, especially in regard to AI solutions, integration capabilities and connectivity. “These partnerships will be essential — for both the vendors and the financial institutions—as we face industry shifts and address market needs together,” she detailed.
Meanwhile, Michael Lubansky, SVP of strategy at Red Oak, emphasised that smaller innovators are attracting VC funding to try to build new AI-driven solutions to replace legacy incumbent systems. This has gained some traction for smaller firms, but it will be more challenging for smaller innovators to move upmarket to larger firms with more complex needs.
As for whether consolidation creates more efficient ecosystems, Lubansky remarked that the consolidation of vendors via partnership, M&A, and integration should create more efficient ecosystems over time, and he expects that smaller innovators will put pressure on larger incumbent solutions toward continued innovation and connectivity.
Importance of execution
In the mind of Ryan Swann, founder of Manchester-based RiskSmart, customers are tired of juggling tools and manual processes. Integration fatigue is real – they want unified platforms that do more with less and keep things simple to get buy in and adoption business wide.
How can smaller innovators survive in a market that is consolidating? For Swann, a key step here is to stay focused. “Niche players who do one thing brilliantly will always find a place, especially if they play nicely with others,” he said.
Swann also believes that depends on execution when it comes to the question of whether consolidation creates more efficient ecosystems. “The best consolidators keep the spark of innovation alive while building something scalable,” he remarked.
Lastly, Swann believes that the industry will move from vendor relationships to partnerships built on shared data and goals.
Swann concluded by stating, “Collaboration will become the new competitive advantage.”
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