Evaluating RegTech Solutions: A Practical Framework

Part 3 of 4: RegTech Selection Done Right

The demo looked perfect. The data loaded instantly. Every click worked exactly as expected.

But here's what you didn't see:

Perfect data, not your messy reality. Curated workflows, not your edge cases. Controlled scenarios, not your daily ambiguity.

In Part 1, we explored why most RegTech investments fail before implementation begins and why the real trap is buying technology when you should be buying trust.

Now comes the harder question: How do you actually evaluate solutions beyond the demo theatre?

The Demo Is a Performance

Let's be clear about what a vendor demo actually is ... a carefully rehearsed performance designed to close a deal.

The data is clean because they cleaned it. The workflows are smooth because they designed the scenario. The system is fast because it's running on optimised infrastructure with a fraction of your data volume.

None of this is deceptive. It's just not reality.

Your reality includes:

• Legacy systems that don't play nicely with modern APIs

• Data quality issues that have accumulated over decades

• Edge cases that represent 20% of your volume but 80% of your risk

• Users with varying technical comfort levels

• Regulatory requirements specific to your jurisdiction and business model

The demo shows you what's possible under perfect conditions. Your job is to figure out what's probable under yours.

The Trust Equation

Research into how companies actually buy AI-powered risk solutions revealed three trust triggers that matter more than any feature list:

Transparency: Can you explain why the AI flagged this as risky?

This isn't a nice-to-have. It's a regulatory requirement. When an examiner asks why a particular transaction was escalated ... or worse, why it wasn't. "the algorithm decided" is NOT an acceptable answer.

Ask vendors:

• How does your system explain its decisions?

• Can a non-technical compliance officer understand the rationale?

• What documentation is generated for audit purposes?

• How would we respond to a regulatory inquiry about a specific alert?

If the answers are vague, that's your answer.

Accountability: Who do I call when the model gets it wrong?

The vendor with 99.7% accuracy lost to the one whose team answered calls at midnight during an incident. This finding should reshape how you evaluate support structures.

Ask vendors:

• What happens when the system generates a false positive on our largest client?

• Who is our point of contact for urgent issues?

• What's your average response time for critical problems?

• Can we speak to customers who've had incidents? How were they handled?

The sales team will always be responsive. What matters is whether the support team will be.

Partnership: Will you help us grow, not just install and disappear?

Regulatory requirements evolve constantly. Your business enters new markets, launches new products, faces new risks. The vendor who's perfect for today may be obsolete for tomorrow.

Ask vendors:

• How do you handle regulatory updates?

• What's your product roadmap for the next two years?

• How do you incorporate customer feedback into development?

• What happens if we outgrow your current capabilities?

The best vendors see your success as their success. The rest see your signature as the finish line.

Integration Reality vs. Integration Promises

"We integrate with everything" is the most common lie in RegTech sales.

The reality is more nuanced. Most solutions can technically connect to most systems. The question is: at what cost?

Questions to ask:

• Which integrations are native, and which require middleware?

• How many of your current customers use our specific core banking system / case management tool / data warehouse?

• What does a typical integration timeline look like for an organisation our size?

• Who does the integration work — your team, our team, or a third party?

• What happens when our source systems change?

Red flags to watch for:

• "We have an open API" without specifics on documentation or support

• No reference customers using your specific tech stack

• Integration timelines that seem too optimistic

• Vague answers about who owns ongoing maintenance

The integration question isn't "can you connect?" It's "can you connect reliably, maintainably, and without consuming our entire IT budget?"

The AI Questions Most Buyers Don't Ask

If the solution includes AI or machine learning (and most now do), you need to dig deeper than accuracy rates.

Model transparency:

• What type of model powers this capability?

• Can we see how the model weighs different factors?

• How do you prevent and detect bias in the model's decisions?

Training and adaptation:

• What data was the model trained on?

• How does it adapt to our specific patterns over time?

• Who owns the model improvements — us or you?

Failure modes:

• What happens when the model encounters something it hasn't seen before?

• How do you handle model drift over time?

• What's the human override process?

The explainability test:

Ask the vendor to walk you through a specific alert. Not a demo alert, a realistic scenario you provide. Can they explain, in plain language, why the system would flag it? Could you repeat that explanation to a regulator?

If the answer is "the model identified patterns consistent with risk", that's NOT an explanation. That's a black box with marketing language.

Why You Should Never Skip the Pilot

A pilot isn't a formality. It's your only chance to see reality before you've committed.

What a good pilot reveals:

• How the system handles your actual data, with all its imperfections

• How your team actually interacts with the interface

• Integration challenges that weren't apparent in technical discussions

• Vendor responsiveness when things don't go as planned

• Whether the promised value materialises in your environment

Pilot red flags:

• Vendor resistance to using your real data

• Highly controlled pilot scope that avoids your known pain points

• Vendor staff doing work your team would need to do post-implementation

• Metrics that don't align with your original problem definition

• Pressure to move to contract before pilot completion

The relationship test:

The pilot is also your best preview of the ongoing relationship. How does the vendor respond when something breaks? How do they handle feedback? Are they defensive or collaborative?

The vendor with the best technology but worst relationship will fail you. The vendor with good-enough technology and genuine partnership will succeed.

Building Your Evaluation Scorecard

Move beyond feature comparisons. Score vendors across dimensions that actually predict success:

Capability (40%)

• Does the solution address your defined problem?

• How does it handle your specific edge cases?

• What's the realistic accuracy in your environment?

Trust (30%)

• Transparency: Can decisions be explained to regulators?

• Accountability: Who's there when it breaks?

• Partnership: Will they grow with you?

Integration (20%)

• Realistic timeline and resource requirements

• Track record with your specific tech stack

• Ongoing maintenance model

Total Cost (10%)

• Not just license fees - implementation, integration, training, ongoing support

• Hidden costs: customisation, data migration, additional modules

• Opportunity cost of your team's time

Notice that cost is only 10%. The cheapest solution that doesn't work is infinitely more expensive than a pricier solution that does.

The Bottom Line

The question isn't "Does this look good?"

It's "Will this work in our reality?"

And beyond that: "Can we trust this vendor when reality gets messy?"

The winning vendors don't have the best technology. They have:

• Explainable AI that non-technical boards can understand

• Human experts who translate outputs into compliance language

• Gradual implementation paths that build confidence over time

• Stories of other compliance leaders who succeeded — and failed — with their solution

They sell peace of mind, not precision rates.

Evaluate accordingly.

📋 Download: The RegTech Selection Checklist

We've distilled this framework into a practical one-page checklist you can use during vendor evaluations.

16 questions across three dimensions:

• Transparency - Can you explain this to a regulator?

• Accountability - Who's there when it breaks?

• Partnership - Will they grow with you?

Plus: Demo reality checks, red flags to watch for, green flags to look for, and a scoring framework.

👉 Download the checklist (PDF)

Print it. Bring it to your next vendor meeting. Share it with your team.

Because compliance technology is a relationship, not a transaction.

Next in the series: Part 4 - Making It Work: Implementation, Inclusion & Long-Term Success