Why Everyone’s Talking About RegTech
In today’s digital-first economy, risk moves faster than ever. Billions of UPI transactions flow every month, stock markets trade in microseconds, and artificial intelligence powers everything from credit scoring to fraud detection. With innovation at this scale, risks multiply — cybercrime, fraud, money laundering, and systemic shocks.
This is where RegTech (Regulatory Technology) steps in. At its core, RegTech is the use of technology — artificial intelligence, blockchain, cloud computing, big data — to make regulatory compliance and risk management faster, smarter, and more cost-effective.
Why does it matter now? Because traditional compliance methods, based on manual audits, checklists, and reactive processes, simply cannot keep up with today’s financial ecosystem. Regulators like RBI and SEBI demand stricter compliance, while companies must balance speed, innovation, and safety. RegTech provides the missing link: automation, transparency, and proactive risk monitoring.
From Checklists to Code: How RegTech Rose in India
Globally, RegTech emerged after the 2008 financial crisis, when regulators worldwide introduced stricter compliance rules to prevent another collapse. Financial institutions realized they couldn’t keep up without automation. This gave rise to early RegTech solutions in the US and Europe.
In India, the story took shape in the last decade:
- 2016 onward: Demonetization, the rise of digital wallets, and Aadhaar-based KYC pushed financial services into digitization.
- 2019–2022: UPI adoption exploded, rise in cyber fraud cases required strong cyber risk management.
- 2024–2025: Events like RBI’s crackdown on Paytm Payments Bank and SEBI’s enhanced surveillance of trading platforms accelerated the demand for RegTech in India to combat regulatory risk.
Today, RegTech in India is no longer a niche. From startups to stock exchanges, every major player integrates RegTech solutions to survive and grow.
Key Risk Areas Where RegTech Plays a Role
To understand RegTech’s power, it helps to see the types of risks it addresses:
- Fraud & Cyber Risk
- AI models scan millions of transactions to detect unusual patterns, stopping fraud in real-time.
- Example: Razorpay’s fraud detection engines block suspicious payments before they’re processed.
- AML & KYC (Anti-Money Laundering / Know Your Customer)
- Digital KYC ensures compliance with RBI norms while reducing onboarding friction and digital risks.
- AML tools monitor cross-border payments to prevent money laundering.
- Market & Trading Risks
- Algorithms detect insider trading, pump-and-dump schemes, and unusual trading patterns.
- Stock brokers like Zerodha rely on these systems to stay aligned with SEBI’s strict surveillance standards.
- Operational Risk
- Automated compliance reporting reduces human error and speeds up audits.
- Instead of waiting for monthly reports, companies can generate risk dashboards in real time.
- Systemic Risk
- RegTech helps regulators and firms monitor interconnected risks that could destabilize the financial system — a critical need in a country where NBFC and banking crises have had ripple effects.
Behind the Scenes: How Indian Players Use RegTech
India provides some of the most compelling stories of RegTech adoption:
- Razorpay → Uses AI-driven fraud detection and automated compliance engines that align with RBI’s KYC/AML rules. For merchants and consumers, transactions feel seamless, but behind the scenes, RegTech is doing the heavy lifting.
- Paytm → Faced regulatory heat in 2024 when the RBI flagged compliance issues at Paytm Payments Bank. In response, Paytm doubled down on RegTech — AI-based transaction monitoring and improved digital KYC systems now reduce both regulatory risk and reputational damage.
- Zerodha → India’s biggest brokerage integrates RegTech in trade surveillance. Algorithms track suspicious trading activity and insider trading risks, ensuring transparency and compliance with SEBI’s guidelines.
- Microfinance NBFCs → Post-COVID, many small lenders adopted AI-based credit risk models and digital compliance platforms to detect early signs of borrower distress. This reduces defaults and builds resilience.
- Crypto Exchanges in India → With the Financial Action Task Force (FATF) Travel Rule, Indian crypto exchanges are investing in RegTech to monitor suspicious transfers and remain globally compliant.
Each example underlines one truth: RegTech isn’t optional — it’s a survival tool.
India vs the World: Who’s Ahead in the RegTech Race?
Globally, RegTech has grown faster in Europe and North America because of their sound financial risk management practices.
- Europe: Banks and fintech companies must follow very detailed rules — like protecting customer data (General Data Protection Regulation), preventing risky trading ( Markets in Financial Instruments Directive.), and keeping online payments secure (Payment Services Directive 2). These strict regulations forced companies to adopt advanced RegTech tools to stay compliant.
- United States: Regulators like the U.S. Securities and Exchange Commission (which watches over stock markets) and Financial Crimes Enforcement Network (which monitors money laundering) are known for tough enforcement. If banks or brokers slip up, fines can run into billions of dollars. To avoid this, financial institutions were early adopters of AI-driven compliance and transaction monitoring.
India is catching up rapidly. While the regulatory framework is evolving, initiatives like:
- RBI’s Regulatory Sandbox (testing of fintech/RegTech solutions),
- SEBI’s advanced surveillance systems, and
- National Payments Corporation of India’s push for UPI fraud monitoring
are ensuring India doesn’t lag behind. In fact, the sheer scale of digital adoption in India makes it a unique testing ground for RegTech innovations.
Turning Frameworks Into Living Systems: RegTech + ERM (ISO 31000 and COSO ERM)
RegTech is not just about compliance — it’s part of a bigger Enterprise Risk Management (ERM) philosophy.
- ISO 31000 defines risk management as a continuous process: identifying, assessing, treating, and monitoring risks. RegTech enables exactly this by giving real-time visibility into risks.
- COSO ERM emphasizes integrating risk into strategic decision-making. With RegTech dashboards, risk metrics can be reported directly to boards, helping leaders make informed choices rather than reacting to crises.
In other words, RegTech in India operationalizes ERM: it transforms frameworks from documents into living systems that organizations actually use daily.
Challenges of RegTech Itself
No innovation is risk-free, and RegTech has its own set of challenges:
- Over-Reliance on Algorithms: AI can miss context or develop biases. Blind trust in automated compliance may backfire.
- Data Privacy Risks: Storing and analyzing vast amounts of customer data raises concerns under India’s new Digital Personal Data Protection Act.
- Regulatory Lag: Technology evolves faster than regulations. Companies may innovate into grey areas where compliance is unclear.
- Cost & Integration: Smaller firms may find advanced RegTech solutions expensive or difficult to integrate with legacy systems.
These challenges highlight that RegTech itself must be managed within a risk framework — it is not a silver bullet.
Future Trends – Where RegTech is Headed
The future of RegTech is even more ambitious:
- SupTech (Supervisory Technology): Regulators are themselves adopting data analytics and AI risk management strategies to supervise firms in real-time. Imagine SEBI scanning market risks with the same speed as traders.
- Predictive Compliance: Moving from detecting risks after they occur → to predicting them before they happen.
- Global Standardization: As finance becomes borderless, global compliance rules (like FATF norms) will push Indian firms toward more advanced RegTech.
- Integration with ESG: Environmental, Social, and Governance risks are rising, and RegTech will soon track compliance in these areas too.
Conclusion – Why RegTech is Now the Backbone of Risk Management
Risk in finance is no longer about what happened yesterday — it’s about what could happen in the next second. In such a world, manual compliance and outdated audits are liabilities. RegTech provides speed, transparency, and resilience.
For India, with its digital-first population and rapidly evolving regulatory landscape, RegTech is not just a tool — it’s the backbone of modern risk management. From protecting everyday UPI payments to safeguarding billion-dollar markets, RegTech ensures that innovation and risk can coexist without destabilizing the system.
As risk managers, regulators, and businesses prepare for the future, one thing is clear: wherever finance and technology meet, RegTech will be the invisible guardrail keeping trust intact.
