How do RegTechs compare in numbers of staff, funding, location and core activities? Recently, we published the PlanetCompliance RegTech Directory, the guide to the RegTech industry. We examined over 150 RegTechs in detail and analysed the data. This is a summary of our findings but read the full report for more insights on the industry such as the Regulator’s angle, obstacles of RegTech adoption and profiles of all the RegTech firms.
The average RegTech was founded 2011, is based in London or, less likely though, in New York. Its main activity is probably Client and Counterparty Identification or Monitoring. The company has about 15 full time staff members and has raised a total of approximately $5.15M.
Obviously, this is a very generalised picture (though a couple of companies come pretty close) considering the variables and the variety of models in the RegTech industry. Having said that, RegTech and its cousin FinTech are living examples of the power of data, so we wanted to share some conclusions and insights we have gathered from the data we have collected:
London is the centre of the RegTech world with almost half of the companies included in this report are headquartered or have an office there. The explanation is easy given London’s attraction as one of the financial centres of the world and the support innovation has received there. New York is a similar case, but the US RegTech market is more distributed, naturally towards the San Francisco Bay Area because of the Sillicon Valley tech and financial support, but also with several firms being based in Chicago and Boston. There is no such rivalry in Europe yet though in light of the Brexit decision there has been a lot of talk about having a piece of London’s cake. The reality is different though: Dublin continues to be more attractive; Zurich and Luxembourg somewhat surprise, but their strong links to the wealth management and fund industry respectively are likely to be key drivers; the other European financial centres like Paris and, in particular, Frankfurt have little to show for, which could, however, be also a case of less visibility. We would be happy to be proven wrong and see more firms coming from there, too. Singapore appears to be more attractive that Hong Kong, but only very few firms are headquartered their with instead only a hub for the region. Its rival for dominance in the Asia-Pacific region is likely to be Sydney, which together with other Australian cities, is home to a couple of excellent RegTech firms already.
Out of the seven categories, General Compliance is the most frequent, which shows that many offerings cannot be squeezed into one of the traditional areas or qualify for new developments and wider offerings. However, client and counterparty identification, mostly in the form of KYC and AML services, and Monitoring are close on its heels. They are the key areas, where RegTech has had the biggest impact so far, but with the rise of artificial intelligence application to the other areas is likely to increase as well.
The 167 RegTechs in this report employ about 11.000 people with almost everyone we spoke to saying that they intend to add to their staff in the near to medium term. The adjusted average number of staff discounting the few big players that we have included in the Directory is more around ten though with more than two-thirds having less than 30 employees on their books. The use of technology clearly explains a lesser need for headcount and it is truly impressive what some firms have created with limited resources. Though there is not necessarily a correlation between number of staff and funding, obviously the headcount increases after successful funding, as it is often the main reason for seeking external financing.
Talking about financing, the RegTechs listed in this directory have so far raised $1.2 billion, though the actual number is likely to be significantly higher: many firms do not disclose the amount they have raised or the funding rounds at all as they are predominantly privately held companies.
Lastly, something that is not really surprising, but worth mentioning all the more: women are the clear minority among key staff members, but there a couple of great examples, so hopefully we’re going to see more of it.
The PlanetCompliance RegTech Directory, the most comprehensive guide to the RegTech industry, can be downloaded for free here.