That is with reference to a new report from Juniper Research, which estimates that spending on RegTech systems, specifically, will escalate from an estimated $18bn (₤ 14bn) this year to $115bn (₤ 100bn) by 2023.
Financial investment is forecast to climb by an average of 45% per annum over the next five years, far greater than the 17% invested in compliance overall, demonstrating a swift move far from traditional compliance solutions.
The Regulatory Compliance Paradox
The aggregated cost of regulatory compliance around the financial sector is approaching $80BN globally. Yet compliance connected threats continue to be at all-time highs.
Why would this be? Simply due to new regulations recommended following the 2008 financial crisis call for firms to accumulate, aggregate and report unprecedented amounts of data, and incorporate complex policies into their business workflows. And yes, these particular rules obviously prone to diverging translations and not consistently harmonised globally. But at the root of the mystery is the industry’s extraordinary state of technology fragmentation: often within a single organisation, the same data is exhibited in various ways through numerous systems.
This can commonly result in highly complex regulatory implementations that have amplified right into uncontrolled costs, still without guarantee of compliance: just how do you prove obedience to a rule, when the logic is hidden deep into a maze of dissimilar systems? This opacity also challenges regulators’ supervisory mandate and might essentially affect market transparency.
Having this rise in intricacy and antiquated systems mirroring the existentialist and obsolescent views, it is estimated that RegTech will make up 40% of businesses total compliance spending by the year 2023.
The findings come as businesses start adhering to General Data Protection Regulation (GDPR), which came into force earlier this year and could hit businesses with fines worth up to 4% of their global annual turnover.
“Any heavily regulated business sector not prioritising RegTech adoption would risk damaging fines from failing to keep pace with regulatory changes,” Juniper warned.
After examining several technologies for estimated timescale of consequences and costs barriers, Juniper concluded that cloud computing is currently one of the most disruptive force in the RegTech sector.
The most recent report argues that transitioning to cloud-based compliance is a “crucial precursor” to other regulatory technological innovation approaches, such as artificial intelligence and big data.
“Unless businesses effectively plan the correct cloud deployments, they will struggle to utilise the advanced technologies required to meet future compliance challenges,” Juniper said.
This follows Claranet UK found that more than half of the UK’s financial sector is currently struggling to comprehend and act on the customer data they accumulate.
Legacy systems are thought of as being one of the main reasons at the bottom of the findings, with cloud technologies indicated as a way of remedying the situation. Traditional spreadsheet systems have lots of inherent risks and need to be migrated to a more potent and scalable system, because as most of us know, if we don’t grow; our businesses, never cease to adapt to new ways of working, our business will become barely a footnote in history.