South Africa’s regulatory technology (regtech) market is expected to grow by 27.7% on an annual basis, to reach $302.31 million (R5.3 billion) in 2024.
This is according to a report by Research and Markets, which notes the regtech industry is expected to grow steadily over the forecast period, recording a compound annual growth rate of 18.5% during 2024-2029.
It adds that regtech in the country will increase from $236.75 million (R4.2 billion) in 2023, to reach $705.75 million (R1.25 trillion) by 2029.
Regtech is the use of information technology to enhance regulatory and compliance processes. It is most usefully applied to heavily-regulated industries and activities such as financial services, gaming, healthcare, pharmaceutical, energy and aviation.
The rise of regtech has been driven by the increasing complexity of regulations, the need for more efficient compliance processes and the high costs associated with non-compliance.
Research and Markets says following South Africa’s recent inclusion in the Financial Action Task Force (FATF) grey list, there is an urgent need for enhanced compliance with international standards.
It notes this has driven financial institutions to adopt regtech solutions that improve their anti-money-laundering and counter-terrorism financing capabilities.
It has been over a year since global watchdog FATF placed South Africa on its grey list for not meeting international standards in anti-money-laundering, combating the financing of terrorism and proliferation financing.
This designation indicates that while the country has committed to addressing these deficiencies, it has not yet fully implemented necessary reforms.
Efforts to address the issues leading to greylisting are ongoing, and the situation is closely monitored by South African authorities and international stakeholders.
Research and Markets adds that the regtech landscape in SA is rapidly evolving, driven by technological advancements and increasing regulatory pressures.
It notes that as organisations seek to enhance their compliance capabilities, the demand for innovative regtech solutions will continue to grow.
“While regulatory complexity and market fragmentation persist, opportunities for collaboration and growth abound. By embracing advanced technologies and fostering partnerships, the South African regtech sector is well-positioned to become a global leader in regulatory innovation, benefiting organisations, regulators and consumers,” says the firm.
It notes that local companies are increasingly implementing automated systems to streamline compliance tasks such as ‘know your customer’ and regulatory reporting. This automation reduces manual errors and enhances efficiency in meeting regulatory requirements.
The research firm adds that financial institutions are forming partnerships with regtech firms to leverage innovative solutions for compliance challenges. These collaborations aim to enhance operational efficiency and ensure adherence to regulatory frameworks, it explains.
It points out that a notable example is Synthesis, which has developed a regulatory reporting system for TymeBank, significantly improving its reporting efficiency and compliance processes.
“This showcases how regtech is transforming compliance practices in South Africa’s financial sector, particularly in light of increased regulatory scrutiny,” it states.
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