Recently-published research finds that regulated firms are spending increasing amounts of regulatory technology – ‘regtech’ – to help them tackle a growing regulatory compliance burden.
The report, published by Juniper Research found that spending on regulatory technology will grow by an average of 48% per annum over the next five years, rising from $10.6 billion in 2017 to $76.3 billion in 2022.
As a percentage of all regulatory spending, it will jump from 4.8% in 2017 to 34.4% by 2022.
The growth in spending comes as banks seek to avoid costly regulatory fines. While figures released from the FCA show that in the UK, fines plunged in the first half of 2016 compared to previous years, the threat of penalties still hangs over the financial sector. The size of some of the largest fines – reported in the Juniper research – shows why firms are right to be concerned.
Source: Jupiter Research
What do we mean by regtech?
Investopedia defines regtech as anything ‘created to address regulatory challenges in the financial services sector through innovative technology’.
In practice, regtech can refer to anything from company-wide, cloud- or systems-based solutions to automating some or all of your compliance review and approval processes.
And as we have explored previously, the potential benefits of automation for Compliance teams are well-recognised.
How can regtech help with compliance?
Technology can make the quest for compliant approaches cheaper, quicker and more efficient. It’s not surprising, then, that the FCA has been vocal in its support for regtech.
In this speech last autumn, the regulator’s Director of Strategy and Competition, Chris Woolard, said that with ‘billions of pounds and large numbers of staff…dedicated to the business of regulation… we must ask ourselves if there is an easier, more efficient way for firms to fulfil some of their regulatory responsibilities’.
This fits with the FCA’s push towards innovation in the sector. Freeing up resource by automating some or all of your sign-off processes can increase firms’ capacity to deliver innovative solutions for customers.
The Jupiter report claims that ‘with multinational financial institutions such as Citi having as many as 30,000 compliance staff, just 3 bank compliance departments could fill London’s Wembley Stadium’ – a quite compelling image.
Anything that can improve your ability to meet regulatory requirements without the need for more resource has to be a plus. For banks struggling to meet the demands of ever-increasing regulation, increasing compliance efficiency is something of a Holy Grail.
Introducing automation to the compliance process for greater efficiency
Automating parts of your process can have tangible benefits in terms of efficiency and effectiveness.
- Ensure your promotions use correct data and performance figures, via online slide libraries that lock down approved content and automatically update statistics as they change
- Add correct risk warnings, disclosures and disclaimers, and make sure they meet requirements around prominence
- Make approvals faster and easier, eliminating duplication and the need for manual intervention
- Reduce errors and omissions by minimising hard copy reviews and edits
- Mandate Compliance team sign off, minimising the chances of regulatory breaches
- Create an FCA-compliant audit trail as a matter of course
Improve your compliance efficiency by making the most of regtech
If you want to explore the potential technology has for your firm’s compliance, you can buy the full Jupiter Research report here. Alternatively, you can read our free whitepaper on The benefits of automated workflow systems. The whitepaper is available to download here.