These challenger banks are also currently operating in relative niches. Yes Monzo has a million bank accounts, but in terms of their product offering, it isn't close to the breadth of your traditional "High Street" bank. As their product offering expands, their compliance requirements will become a lot more complex, and will lead to more compliance personnel being hired. They have also yet to experience a massive overhaul to the compliance requirements of their existing systems. I'm sure they are better placed to handle it than a traditional bank but it won't be easy.
This is a really interesting angle but I'd go somewhat further - it's not just the systems that need to be new, its the whole business! Monzo has had the advantage that its been able to design everything to fit both what is possible with automated systems and the current regulatory environment.
If you've got lots of edge cases from a legacy business then its probably not going to work anywhere near as well even if you could rewrite everything.
Compliance goes hand in glove with regulatory reporting. Reporting to regulators should be a marginal cost thing - if the data internally is same, well managed and fully auditable in an automated fashion.
Doing this in finance is something the new challenger banks (ie monzo built about five years ago by ten coders and now has a million UK accounts) - this is something they can have one compliance person because all their systems are new and written with compliance in mind.
Doing this for most major banks is next to impossible. It would rewriting everything (#)
(#) Actuallly i would say this is a good strategic plan for most major banks. Might not be able to persuade the board but still.