The pandemic shift to digital onboarding that increasingly uses intelligent automation will provide banks with cost savings of over $460 million over five years, and improve customer experience.

But that’s nothing compared to overall spending on regulation technology. According to a study released Monday by Juniper Research, spending on regtech is likely to exceed $130 billion by 2025, up from $30 billion in 2020. This growth in spending is due to the increased use of artificial intelligence (AI) to automate manual tasks alongside the transition to digital onboarding at financial institutions.

“Businesses should rebuild their KYC (know your customer) and onboarding processes from the ground up to take advantage of these new capabilities, or they will lose ground to digitally native competitors,” Nick Maynard, lead analyst at Juniper Research, said in a release.

When considering the cost of implementing such technology, banks and financial institutions are likely to look at, “total cost of ownership,” Maynard said. This should include costs associated with bot management, governance and training, compared to total costs prior to the introduction of new technology, including for staff and legacy systems.

While KYC and identity verification are the most popular regtech use cases, simply using optical character recognition (OCR) to automate processes can also “lead to major efficiencies,” Maynard pointed out. OCR technology allows users to convert documents into editable and searchable data.

Nearly 18% of global digital onboarding at banks in 2025 will use AI systems, compared to less than 4% in 2020, according to the Juniper report. In fact, several banks have already rolled out tools to digitally onboard customers, including the $1.3 trillion Royal Bank of Canada (RBC), the $2.7 trillion HSBC, and the $1.9 trillion Wells Fargo, which have aimed to gain from the efficiencies derived by automating legacy manual processes.

Earlier this month, the Toronto-based RBC told told Bank Automation News it had managed to lower the account opening process time by about 70% in the past year by leveraging new automation technology. Additional use cases for regtech have also emerged for investment and financial planning, which have document-heavy reporting requirements.

“Investment verticals have been quite popular, in regtech terms, because they face requirements to report their position,” Maynard said. “Legacy systems are not capable of dealing with the new digital environment; upgrades to systems and capabilities are a necessity.”

While some banks, like RBC, have chosen to develop their own tech to digitally onboard customers, Maynard said the overall trend indicates that “regtech is mostly a third-party solution, sold on a software-as-a-service basis.”

“Up until the widespread availability of these solutions, only large institutions would have had the budgets to develop their own internal solutions using AI,” Maynard said. “This is no longer the case.”