How is RegTech transforming legacy compliance platforms? – Part 1
As regulatory landscapes grow increasingly complex, RegTech is breathing new life into legacy compliance platforms. By integrating AI, machine learning, and cloud-based solutions, it replaces outdated, manual processes with streamlined, real-time automation. This shift promises enhanced efficiency and accuracy for financial institutions navigating ever-tightening rules. Yet, the question looms: How deeply can RegTech transform these entrenched systems?
RegTech is fundamentally reshaping legacy compliance platforms by integrating advanced technologies like AI, machine learning, and cloud computing to automate manual processes, enabling real-time monitoring and reducing operational costs by up to 30-50%, according to research by PwC.
South African RegTech firm RelyComply believes that legacy platforms can often feel like a safety blanket when the thought of overhauling workflows, team operations and data sounds too complex or damaging for the bottom line.
The firm said, “With the option to augment those existing platforms, traditional financial institutions faced a new path, but one that is still not completely averse to risk, given the complexity of criminals today and regulators’ expectations.”
Disconnected data and systems across the AML process lack the functionality to scale, and cause duplicated tasks that eat up costs far more readily than so-called NextGen RegTech platforms that can transform the market, said the firm.
It added, “Rather than full-scale rebuilds or rearchitecting, RegTech instead provides integrations to back up the very best of an institution’s AML data and processes with capabilities for real-time monitoring and alert detection. APIs ensure that banking functions are strengthened by third party support and services that make them highly specialised to their consumers, and easily updatable with features to enhance the experiences of compliance teams and end users alike.”
For RelyComply, these integrations ensure that users can customise their AML processes with cloud-based infrastructure: accessible to multiple teams, with networked backups that add security for sensitive customer data and reduce the threat of hardware failures that monolithic systems pose. “Cloud-based architecture retains flexibility, where this optionality to adjust applications in a modular way keeps AML constantly evolving in line with newly introduced regulations, which at this stage are a constant migraine for financial compliance teams,” said the business.
This is also paramount given the diversity of the financial ecosystem today, the firm stated. The technological and human-based resources available to a traditional Tier 1 bank will always differ from a startup lending platform, but each carries the responsibility of ensuring financial crime is detected, raised and reported duly, it added.
“Building up RegTech in stages stays suited to different-sized business needs along their journey to create a substantial end-to-end AML system granting self-service control to fine-tune risk policies and practices,” claimed RelyComply.
The firm concluded, “API connectivity and cloud architecture are keys to scale, with RegTech partnerships an enabler for all manner of institutions to hit the market through a supported, cost-effective and targeted roadmap for NextGen AML adoption that also delivers ROI.
“The potential for adapting to changing compliance utilising transformative RegTech is there, and uptake is growing; it’ll take a more widespread culture that recognises the value of collaboration to solve today’s compliance hurdles, and maintain functionality that will become more necessary when the criminal side of the AML coin develops its sophisticated means.”
The most friction
According to Baran Ozkan, CEO and founder at Flagright, the first systems to be reengineered are the ones that create the most friction for regulators and frontline teams: alerting and case management, sanctions and name screening, rules engines that were hard coded years ago, and the reporting layer that assembles regulatory filings.
He said, “These are easiest to modernize because they sit at the edges of the stack and can run in parallel while you phase out old components. The integration pattern that works is API first and event driven: normalize data once, stream it to modular services, and let adapters talk to the core banking or processor systems. That avoids wholesale rewrites and keeps risk low during migration.”
Ozkan believes that cloud-native platforms change the cost curve and the release cadence. “Elastic compute means you scale for peaks and pay for what you use, automated pipelines mean policy and model updates move from quarterly drops to weekly increments, and horizontal scaling keeps investigation queues short when alert volumes spike,”
Firms that plan the transformation well are seeing tangible ROI in faster onboarding, states Ozkan, shorter investigation times, and lower infrastructure overhead. Where ROI stalls is tool sprawl.
He added, “If you add point solutions without a shared data model and common workflow, you trade legacy pain for integration debt. The answer is a platform approach with clear ownership of data, policies, and evidence. At Flagright we emphasize one normalized event stream and a single audit trail across monitoring, screening, and reporting so complexity goes down as capability goes up.”
Efficiency at scale
For Wolfgang Berner, CPO and co-founder at Hawk, the first compliance systems being reengineered are those that are unstable, don’t properly leverage data (with AI), take forever to complete jobs with no visibility or in general are costly to maintain.
Berner added, “Legacy platforms often require human touchpoints often involving their vendor or third-party help for even routine updates — like simple tweaks to rules, lists, configuration more broadly, adjusting models, or producing reports — which creates operational burdens on compliance teams.:
This lack of agility, combined with systems prone to instability, makes them the natural starting point for modernization. Berner believes that RegTech is unlocking efficiency at scale, allowing financial institutions to grow their business and adapt compliance programs based on self-service, stable AI-powered data-driven systems.
“That can be done even without necessarily ripping out legacy platforms or making significant upfront infrastructure investments deploying in a so-called overlay mode,” said Berner.
For the Hawk co-founder, cloud adoption accelerates this shift, enabling firms to scale faster iterate and improve systems quicker.
“The ROI is clear: lower maintenance costs, reduced operational burden, and less exposure to future regulatory risk,” Berner finished.
Doubling down
As we continue to push through 2025, financial institutions of every shape and size are doubling down on RegTech to modernise their legacy compliance platforms, states RegTech firm AscentAI.
The firm added, “But the narrative has shifted: the early “AI as a magic bullet” hype has matured into a more pragmatic view—AI applied thoughtfully, precisely, and responsibly. Firms are now cutting through the noise, investing in RegTech grounded in solid business processes, then layering in AI to automate and optimize where it truly adds value.”
For AscentAI, it believes seamless integration has become a top priority. “Institutions want RegTech that plugs directly into their enterprise through robust APIs, creating a supercharged, complementary tech stack.
“That’s why AscentAI has invested heavily in our API—engineered to deliver our full horizon scanning and obligation-based regulatory change management capabilities directly into customers’ in-house tools or GRC platforms. Whether firms are running legacy infrastructure or migrating to the latest cloud-native, AI-powered systems, our API ensures faster adoption, smoother workflows, and accelerated productivity,” said the company.
Ultimately, AscentAI states, every technology decision comes down to ROI – with too many companies learning the hard-way that ‘flashy’ AI-powered tools often overpromise and underdeliver—leaving teams still slogging through dense regulatory documents by hand.
The company concluded, ”AscentAI customers, by contrast, are realizing real returns. With access to fully processed, enriched regulatory obligations that require no manual intervention, their teams move faster, work more accurately, and operate with greater confidence every day.”
