Thomson Reuters will release the results of its second global survey assessing the impact of regtech and fintech on the role of compliance in financial services firms at this week’s A-Team Group RegTech Summit for Capital Markets in New York. The survey included compliance and risk practitioners from nearly 800 financial services firms across the world. The results indicate an increase in favourable opinion of regtech compared to last year, and a significant gain in the number of respondents that have implemented a regtech solution, in most cases on the basis of improved efficiency and effectiveness.
Ahead of the A-Team RegTech Summit for Capital Markets, we caught up with Todd Ehret, senior regulatory intelligence expert, Thomson Reuters Regulatory Intelligence, who will present the survey results and discuss regtech and compliance at the event with his colleague Sean Beals, global head of Regulatory Intelligence, Risk, Thomson Reuters.
Considering the increasingly positive view of regtech detailed in the Thomson Reuters report – Fintech, Regtech and the Role of Compliance – 2017, co-authored by Stacey English, head of Regulatory Intelligence for Thomson Reuters, and Susannah Hammond, senior regulatory Intelligence Expert for Thomson Reuters – Ehret notes a drive towards business decisions made on productivity, efficiency and costs. He explains: “From a US perspective, the post-crisis implementation of Dodd-Frank led to four or five years of significant investment, change and strengthening of compliance departments. Over the past couple of years, firms have been looking at where money has been spent, what has been built, and how it could be made more efficient.” The need for cyber resilience and emergence of new technologies are also driving interest in the potential of regtech.
Ehret adds: “Today’s compliance department is somewhat similar to where trading desks were 15 years ago. There was an abundance of traders everywhere doing things manually. Most were steadily replaced by computers and automation despite increasing trade volumes.”
As pressure on risk and compliance has increased, so too has the need to deploy specialist skill sets, particularly around fintech and regtech solutions. The Thomson Reuters survey shows 75% of respondents reporting a widening of skill sets and 28% investing in specialist skills in 2017. This is up from 56% in 2016, with 15% investing in specialist expertise.
Ehret comments: “There is no longer a great demand for generalists in compliance, the need is for highly specialised skill sets as the compliance function shifts to regtech.” This is expected to be reflected in budgets, with more spend being allocated to regtech solutions and less to large compliance teams.
In terms of regtech products, the Thomson Reuters survey found the number of respondents that had already implemented a solution almost doubled in 2017 to 30%, up from 17% in 2016. Among the most widely implemented are regulatory change monitoring and risk solutions.
Looking at compliance and regulatory risk management on a macro level, the impact of regtech is expected to be significant, but not at any cost. While Thomson Reuters reports the top three areas of impact in 2017 as interpreting regulations and their impact, implementing regulatory change and capturing regulatory change, Ehret warns that budgets remain a concern. He explains: “Many firms still look at compliance as a cost rather than a revenue centre and are reluctant to increase budgets. However, if compliance can do more with regtech solutions at no or little more cost, there will be increased implementation. And as solutions become more sophisticated and firms more efficient, regtech adoption will rise, although cost will always be a concern.”