Financial institutions accelerated spending on regulatory technology during the pandemic, a survey of almost 40 organisations conducted by Clausematch has found. The survey also suggested that practitioners would like to see regulators take a more proactive role in promoting the adoption of technology in compliance.
More than 42% of survey respondents witnessed sharp rise in spending on regulatory solutions over the last six months, mostly due to changes in working practices during the pandemic, which increased demand for solutions to improve collaboration and boost efficiency.
The survey also showed that 50% of demand from all new business for the RegTech industry is from banks, which have been slow to embrace new technologies, including the secure cloud. This is likely because of privacy threats traditionally perceived to be associated with cloud-based technology, such as a risk in cybersecurity hackings. Of those surveyed, 92% of firms said that the pandemic has positively impacted the adoption of cloud-based products. The outdated processes and legacy technology previously enjoyed by financial institutions are no longer suitable to meet the heavy demands of today’s regulatory landscape.
The most dominant trend throughout the pandemic was the increase in remote compliance, with 92% of firms having shifted to a remote working model during the pandemic. This new style of working has created new risks for compliance teams. For example, as a result of remote working during the pandemic, many employees have turned to unmonitored communication apps such as WhatsApp to share sensitive information. Survey participants also reported that the pandemic has caused a rise in virtual Know-Your-Customer (KYC) checks, and boosted demand for a streamlined process. RegTech solutions bring everything that a company needs to conduct its business together on one, safe and secure platform.
As financial institutions turn to technology to increase efficiency and ease the compliance burden, there is an increased demand from RegTech firms on regulators to adopt regulatory technology. This can be seen in findings of the survey when participating firms were asked to what extent they would like to see the regulator take a more proactive role in the promotion of RegTech solutions. The answers were as follows: 15.4% of participants said they wished to see the regulator take a less active role, 21.3% of participants said they would like to see the regulator remain moderate in its efforts, and 61.5% of participants said they would like to see the regulator being considerably more proactive in adopting RegTech.
The survey revealed that the impact of the pandemic on RegTech has been significant, with heightened demand for innovative solutions within the financial services industry and to address the challenges created by the pandemic for compliance teams. RegTech solutions are providing the answers to the difficult questions that more and more businesses find themselves faced within the current climate of uncertainty.