Regulatory Technology (RegTech) didn’t show up out of nowhere. It has been building for more than a century, quietly and steadily, on the back of global finance, new technologies, and a growing need for smarter, faster compliance.
What started as telegraphs and paper trails has become automation, machine-readable regulations, and AI. This is the story of how we got here. And why RegTech matters now more than ever.
1866–1967: FinTech 1.0, the roots of modern finance
With the end of the Industrial Revolution, groundbreaking technologies such as the telegraph, steamships, and railroads began to connect markets worldwide. These innovations didn’t just change transportation; they transformed how money and information moved across borders.
As financial markets grew rapidly, the need for regulation became more urgent. The late 19th and early 20th centuries witnessed increasing pressure to establish formal banking systems, central banks, and standardized accounting practices to bring order to this rapidly evolving landscape.
These foundational frameworks paved the way for technology to enter the scene.
This period marked the beginning of FinTech 1.0, a time when modern financial infrastructure began to take shape, laying the groundwork for the systems we rely on today.
1967–2007: FinTech 2.0 and the first form of RegTech
As the financial services industry started to embrace digital innovation, a new era began. FinTech 2.0 marked a shift in how financial institutions handled data, payments, and compliance.
- 1968: In the UK, Dennis Gladwell from the Joint Stock Banks Clearing Committee launched the Inter-Bank Computer Bureau. This is one of the first electronic payment systems. This laid the foundation for modern automated clearing services.
- 1970: The U.S. introduced the Clearing House Interbank Payments System, streamlining data flows between banks.
- 1973: SWIFT (Society for Worldwide Interbank Financial Telecommunication) was founded, transforming international banking by enabling real-time data exchange across the global financial sector.
With digital finance expanding, regulators began to recognize emerging gaps in oversight. Financial systems were growing more complex and harder to monitor.
1987 Black Monday wake-up call & RegTech 1.0 emerges
On October 19, 1987, stock markets worldwide crashed. The Dow Jones Industrial Average dropped over 22% in a single day. It was a shock and a signal.
Automated trading and global data flows had amplified the crisis. Regulators realized that as technology advanced, oversight needed to keep pace.
In the aftermath of Black Monday, early efforts to apply technology to compliance began to take shape.
- Trade-reporting systems were introduced to detect insider trading and market abuse. For example, the SEC’s Electronic Blue Sheets (EBS) and FINRA’s Order Audit Trail System (OATS) helped regulators trace trades and reconstruct market activity.
- Market surveillance systems developed by exchanges, such as the NYSE’s Market Surveillance System and NASDAQ’s early SMARTS technology, began monitoring trading data in real-time to flag unusual activity.
These tools were designed to keep pace with faster and more complex financial markets, signaling a shift toward technology-assisted oversight.
At the time, these systems were still considered part of the broader financial infrastructure, not RegTech. But in hindsight, they laid the groundwork. The idea of using technology to support regulatory compliance was taking shape, even if the term RegTech had yet to be coined.
1997–1998: Risk, collapse & the digital frontier
The late 1990s pushed the limits of early financial technology. The collapse of Long-Term Capital Management, triggered by the Asian and Russian financial crises, exposed profound vulnerabilities in the global financial system.
There was growing reliance on complex, computerized risk models. These systems promised smarter decisions but also masked hidden risks. When the models failed, the damage spread quickly.
The lesson was clear: technology could amplify both gains and losses.
At the same time, digital banking was gaining momentum. The rise of e-banking introduced a new wave of regulatory concerns:
- Know Your Customer (KYC) and Customer Due Diligence (CDD) became essential to combat financial crime.
- Data privacy and secure data management moved to the top of regulatory agendas.
The pressure to modernize outdated compliance processes intensified.
This period laid critical groundwork for more advanced regulatory technology. Regulatory sandboxes began to emerge, providing financial institutions with a controlled environment to test innovations under supervision.
Meanwhile, the early adoption of big data started to change how compliance teams operated. Rather than relying solely on static reports and manual checks, forward-looking firms began experimenting with data analytics to monitor transaction patterns, detect anomalies, and flag risks in real time. This shift planted the seeds for automated surveillance and risk-based compliance. The approaches that would soon become vital.
2008–2013: RegTech 2.0 Crisis, trust, and the start of compliance tech
The 2008 Global Financial Crisis was a turning point. As major financial institutions collapsed and public trust in the system eroded, it became clear that existing regulatory frameworks were no longer sufficient.
Despite years of digital progress in finance, the crisis revealed a dangerous overconfidence in complex models and a lack of transparency in regulatory reporting. It exposed how fragmented, manual, and reactive compliance processes had become.
In response, regulators introduced stricter rules, more frequent reporting, and higher expectations. Financial institutions had to rethink how they managed regulatory change.
The RegTech Response
To handle the growing complexity, firms turned to technology.
- Workflow automation began replacing manual tasks.
- Many banks adopted tools like Actimize or MetricStream to automate compliance workflows, such as transaction monitoring and internal approvals. Thereby, reducing reliance on spreadsheets and email chains.
- Tools for audit trails, compliance alerts, and risk and identity management gained traction.
- RSA Archer provided configurable risk dashboards, while vendors like Thomson Reuters Accelus offered real-time alerts for regulatory rule changes, helping compliance teams respond quickly.
- Automated data distribution improved traceability and reduced human error.
- Large firms began using centralized systems like SAP GRC (Governance, Risk, and Compliance) to streamline internal controls, feeding standardized data across departments for reporting and audit purposes.
- Regulatory change management software enabled teams to adapt more quickly and maintain alignment with evolving regulations.
- Platforms like Ascent RegTech and Wolters Kluwer OneSumX emerged to map regulatory changes directly to internal policies and procedures, allowing firms to stay up-to-date with minimal manual tracking.
This marked the emergence of RegTech 2.0, not just as a support function, but as a strategic solution. Technology became essential not only to meet regulatory demands but also to improve efficiency, reduce risk, and rebuild trust with customers and regulators alike.
2014–2020: RegTech 3.0 Automation meets early AI
By the mid-2010s, compliance had become too complex, too fast-moving, and too costly to manage manually. Financial institutions needed more than spreadsheets and static checklists. They needed systems that could keep up with all the new regulatory requirements.
In 2015, the UK’s Financial Conduct Authority (FCA) gave this movement a name: RegTech.
No longer just a support function, RegTech was evolving into a core strategy, powered by automation, data, and the first wave of artificial intelligence.
From manual checks to intelligent systems
To meet rising expectations for transparency and risk management, institutions began turning to more advanced RegTech tools. These solutions focused on:
- Anti-Money Laundering (AML)
- Know Your Customer (KYC)
- Fraud detection
- Regulatory reporting
To power these capabilities, RegTech providers started integrating:
- Artificial Intelligence (AI) and machine learning are used to detect patterns and anomalies in vast datasets.
- Cloud computing enables scalable, cost-effective storage and processing.
- API-first architectures for easier integration into legacy systems.
- Real-time regulatory reporting helps firms respond to regulatory requirements faster and more accurately.
The impact
These advances transformed the way compliance was managed. From static and reactive to dynamic and predictive. With better access to data and more automation, companies improved their ability to:
- Monitor risk continuously
- Streamline onboarding and due diligence
- Reduce manual errors
- Stay compliant across jurisdictions
RegTech 3.0 was no longer just about meeting requirements. It became a driver of operational efficiency, customer trust, and competitive advantage.
2021–2025: RegTech 4.0 Smart compliance & norm engineering
As the volume and complexity of regulations continued to grow, RegTech entered a new phase. It focused not just on automation, but on intelligence, scalability, and deep integration across systems.
The shift moved beyond “Know Your Customer” (KYC) to a broader approach: “Know Your Data” (KYD). RegTech 4.0 isn’t just about knowing your customers. It’s about understanding your systems, your risks, and your regulatory landscape at scale.
This evolution has been powered by technologies such as:
- Big Data analytics for pattern recognition and anomaly detection
- Cloud-based infrastructure for speed and scalability
- Machine-readable regulations, enabling automatic rule interpretation
- Predictive risk management to anticipate issues before they occur
RegTech 4.0 in action
Today’s RegTech platforms don’t just track new regulatory requirements. They actively support decision-making. From GDPR to cross-border licensing, the tools deliver:
- Real-time compliance monitoring across entire organizations
- Automated enforcement of internal policies and external requirements
- Faster onboarding and case resolution powered by AI and rules engines
- Scalable risk and identity management across jurisdictions and product lines
Norm Engineering: Rules as Code
At the heart of this transformation is a groundbreaking concept: Norm Engineering.
Norm Engineering is about making legal and regulatory texts machine-readable and executable. Using formal logic frameworks like FLINT, institutions can translate complex rules into code.
Why it matters:
- Reduces interpretation errors
- Enables automated compliance across multiple jurisdictions
- Supports real-time regulatory updates and enforcement
- Builds trust through transparent, verifiable rule logic
- Therefore, enhance regulatory change management
Norm Engineering is reshaping how rules are written, shared, and applied. It lays the foundation for a future where compliance is not just smart, but scalable and reliable by design.
On January 28, 2025, Be Informed, Deloitte, and TNO hosted the world’s first Norm Engineering Conference at the University of Amsterdam. Experts from over ten countries agreed that managing the growing regulatory burden requires urgent investment in AI-driven regulation reengineering using global standards like FLINT.
RegTech isn’t just growing. It’s booming.
With regulations multiplying and markets becoming increasingly complex, companies can no longer afford to ignore smart compliance.
The market is projected to grow at a CAGR of 22% through 2035. From blockchain technology for secure audit trails to automated data distribution and regulatory sandboxes, cutting-edge tools are transforming financial services.
RegTech is no longer optional. It’s essential for staying ahead, reducing risk, and building trust in an uncertain world.
Conclusion: The RegTech Evolution Has Just Begun
From paper trails and telegraphs to AI-powered platforms and machine-readable rules, RegTech has come a long way. But this is just the beginning.
As regulations continue to evolve, so must the tools we use to navigate them. With the rise of Norm Engineering, AI, and scalable automation, compliance is becoming not just smarter, but faster, more reliable, and future-ready.
To stay ahead, organizations need more than reactive processes. They need proactive, intelligent systems that turn regulation into a competitive advantage.
The future of compliance isn’t manual. It’s machine-readable. It’s predictive. It’s RegTech.
Sources:
1. https://www.moderntreasury.com/learn/what-is-bacs
2. https://www.federalreservehistory.org/essays/stock-market-crash-of-1987
3. https://economicsobservatory.com/russias-1998-currency-crisis-what-lessons-for-today
4. https://www.fca.org.uk/firms/innovation/regtech
