This is according to a new report from Juniper Research, which predicts that spending on RegTech systems, specifically, will escalate from a quoted $18bn (₤14bn) this year to $115bn (₤100bn) by 2023.
Financial commitment is forecast to climb by approximately 45% per annum over the next five years, far higher than the 17% spent on compliance as a whole, reflecting a rapid move far from traditional compliance options.
The regulatory compliance paradox
The aggregated expense of regulatory compliance all around the financial business sector is approaching $80BN globally. Yet compliance associated threats continue being at all-time highs.
Why would this be? Solely due to new regulations brought out soon after the 2008 financial crisis demand companies to gather, aggregate and report unparalleled volumes of data, and include complex policies into their business operations. And yes, these rules obviously prone to diverging analyses and not always harmonised globally. But at the source of the paradox is the industry’s extreme state of technology fragmentation: frequently within a single organisation, the same data is expressed in many different ways using a number of systems.
This can typically trigger highly complex regulatory setups that have grown right into uninhibited costs, still with no certainty of compliance: precisely how do you prove adherence to a rule, when the reasoning is hidden deep into a maze of dissimilar systems? This opacity at the same time challenges regulators’ supervisory mandate and can essentially damage market transparency.
Having this rise in sophistication and antiquated systems showing the existentialist and antique beliefs, it is quoted that RegTech will make up 40% of businesses total compliance spending by the year 2023.
The findings appear as businesses start complying to General Data Protection Regulation (GDPR), which came into law earlier this year and could very well 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 evaluating a variety of technologies for expected timescale of impact and costs barriers, Juniper concluded that cloud computing is currently among the most disruptive force in the RegTech sector.
The current 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 at the present time struggling to comprehend and act upon the customer data they accumulate.
Legacy systems are considered to be some of the main reasons behind the findings, with cloud technologies indicated as a way of remedying the problem. Traditional spreadsheet systems have lots of inherent risks and need to be migrated to a more effective and scalable system, because as most of us know, if we don’t grow; our businesses, continue to adapt to new ways of working, our business will become hardly a footnote in history.