Legacy Systems and Fragmented Data Remain Major Barriers to RegTech Adoption
Legacy technology, fragmented data and internal governance are continuing to slow the adoption of third-party RegTech, even as financial institutions increase their use of compliance technology.
The Global State of RegTech 2026 report, based on surveys of 300 senior compliance decision-makers at financial institutions, input from 100 RegTech vendors and interviews with regulators and market specialists, found that 95% of financial institutions have already deployed RegTech at enterprise scale in at least one regulatory domain. At the same time, 62.7% of institutions said they planned to increase RegTech spending during 2026.
Despite that demand, integration with legacy systems remains the most widely identified barrier to third-party adoption. The research found that 52% of financial institutions and 58% of vendors cited legacy-system integration as a major obstacle. Internal data quality and availability was another significant constraint, while 30% of institutions reported that they were already operating too many disconnected tools.
The gap between vendors and financial institutions was particularly notable around internal ownership. Half of vendors identified fragmented internal ownership as an adoption barrier, compared with only 22% of financial institutions. In practice, RegTech implementation often requires approval across compliance, operations, technology, information security, procurement, legal and risk functions, which can extend implementation timelines even where the business case is already accepted.
Trust and accountability are also becoming more important as RegTech platforms incorporate AI and automated decision-making. Financial institutions remain responsible to regulators for outsourced or technology-assisted compliance processes, meaning that vendors must demonstrate governance, auditability, explainability and clear escalation paths rather than relying only on technical performance claims.
Data fragmentation can compound these concerns. Financial crime functions may operate separate systems for KYC, AML transaction monitoring, sanctions screening, fraud detection and case management, each with different data models and workflows. Adding another standalone tool can therefore create a new silo rather than improving the institution’s overall view of customer and transaction risk.
The research suggests that the next stage of RegTech adoption may depend less on adding more point solutions and more on interoperability. Open APIs, flexible deployment models, connected workflows and stronger data foundations can allow firms to modernise existing compliance environments without replacing every legacy system at once.
For RegTech providers, the practical implication is that product capability alone is unlikely to determine adoption. Institutions increasingly need evidence that a solution can integrate into existing infrastructure, operate on reliable data, preserve regulatory accountability and fit within established governance processes.
