What To Expect In Finance And Regtech In The Year Ahead

Maria Scott, CEO of TAINA Technologyprovider of a world-class regulatory technology platform.

Global thought leaders in the regulatory compliance industry gathered at numerous global regulatory technology (regtech) summits this year to share industry developments, insights and predictions on where the industry is headed in 2023. Several trends are on the horizon that are expected to play an important role in technology advancement and innovation to streamline and simplify the regulatory compliance process.

Here are several accelerating and emerging trends that, based on my experience in the regtech industry, I believe you can bank on seeing in 2023.

1. Expect an increased adoption of regtech solutions.

Macro trends will likely increase the market need for regtech solutions as tax authorities become more aggressive in enforcement. Financial institutions are under growing cost pressure, and customers are now increasingly judicious about their experience with financial institutions. This means that regtech adoption across the financial industry is expected to continue.

2. Plan for staged deployment to support gradual cloud adoption.

Because some traditional institutions aren’t yet ready for the cloud, regtechs must support all forms of deployment—on-premises, private cloud and pure SaaS—as a clear strategic move toward the cloud in all types of institutions. As the financial services industry is on this journey, regtechs must support staged deployment for regulatory services, starting on-premises and migrating to the cloud when the traditional financial institution client is ready.

3. Look for broader adoption of plug-and-play regtech as opposed to heavily customized solutions.

In previous years, traditional financial institutions expected significant customizations. But now there’s recognition that this long-held expectation can come with a significant cost burden to institutions. When it comes to regulatory compliance, it can be safer to stay with technology that’s widely accepted by the industry. Otherwise, it could attract greater scrutiny by regulators.

4. Watch for an increasing shift from internal builds to working with vendors.

Experience shows that building systems typically takes longer and is more costly than project organizations. In addition, there could be greater risk associated with internal builds when compared to industry solutions that are created by companies focused on regtech because they often have more in-depth and current knowledge of regulations.

However, onboarding and contracting continue to be challenging and time-consuming. So, if you choose to purchase a solution, make sure your supplier is flexible, able to respond quickly to ongoing and developing regulatory developments in real time, and can present solutions that cater to your needs.

5. Understand that financial institutions want strategic partners and not just vendors.

Financial institutions want to invest in regtech providers that are more than just vendors. They’re looking for true partners that understand and address their financial and strategic objectives. And they select partners with whom there’s a clear strategic synergy. Expect this trend to continue in 2023.

6. Prepare for a growing focus on clean data.

The number of regulatory reporting requirements is growing—with no indication of slowing anytime soon. As new requirements continue to hit the market, the downstream demand for actionable, well-informed data will continue to increase going forward.

Bad data is expensive. Unstructured data and incorrect reporting mean higher-risk decision-making, as well as increased breaks and manual reconciliations. That puts financial institutions at risk of regulatory and operational consequences. But regtech plays an important role in supplying precise, clean and well-measured data sets.

7. Bank on the evolution of compliance manager skills.

Another trend that’s likely to accelerate in the year ahead is the natural evolution of compliance managers from focusing solely on regulations to also having tech abilities. Growing global demand means managers must be efficient and comfortable executing and implementing regtech solutions in real time. Their ability to do that is critical in identifying potential use cases, starting slowly and then expanding on their successes step by step.

Managers must embrace and adopt an agile approach that’s thoughtfully implemented over time rather than packed into day-one requirements. Another key skill for compliance managers in 2023 will be working effectively at providing feedback to their vendors.

8. Follow the audit trail and look for more digital collaboration.

Audits used to require laborious one-on-one meetings and extensive in-person visits with clients to be completed. With digital tools and transformation, that’s no longer the case. With the remote and digital sharing of information, organizations can now deal with audits remotely but this requires very robust digital audit trails. If you’re considering investing in a platform, look for one that offers detailed audit trails and enables instant remote communication between distributed team members.

9. Get ready for customer experience to be a differentiator providing a greater competitive advantage.

Competition is fierce. As customers become increasingly selective and demanding, financial institutions can achieve an edge in their extraordinarily competitive space by adopting the right solutions to improve the customer experience, such as AI-enabled help desks or chatbots.

Conclusion

Global thought leaders and industry experts in the regulatory compliance space understand that digital innovations and regulatory technology are key to ensuring competitiveness and robust compliance in today’s new digital banking world.

Working with financial institutions across the industry, the trends outlined here are materializing in current and planned digital transformation projects. We’ve only just scratched the surface of the enormous potential of regulatory technology to add value and promote the digital transformation of the financial services industry as a whole. I’m confident that 2023 promises to be a really exciting year in this space!


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