Banks and other financial institutions are becoming more cautious about buying RegTech simply because it includes artificial intelligence. According to Corlytics, rising regulatory demands, faster AI adoption and pressure on technology budgets are pushing institutions to look beyond software features and seek providers that can demonstrate accuracy, governance and consistent results at scale. A key concern is the growing volume of regulatory alerts and data, where false positives can create substantial workloads for risk and compliance teams. Buyers increasingly want to know whether an AI-generated answer can be traced back to its source and how errors will be identified and addressed.
The emerging vendor-selection approach focuses on five areas: precision, accountable innovation, durable technology architecture, cost transparency and collective intelligence. Financial institutions want evidence that AI models have been properly developed, tested and validated, with clear understanding of where they perform well and where limitations remain. They are also examining the hidden costs of AI implementation, including validation work, expert support, change requests and internal resources, rather than assessing only licence fees. Providers using common architectures may offer greater consistency and traceability than fragmented technology environments created through multiple acquisitions.
The shift means RegTech providers are increasingly expected to act as long-term risk and compliance partners rather than software suppliers. Financial institutions remain responsible for regulatory outcomes even when technology is outsourced, making vendor capability, governance and accountability critical considerations. The development also suggests that the growing number of AI-enabled RegTech products is making demonstrable performance more important than simply claiming to use AI.
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