This is with reference to a new report from Juniper Research, which predicts that spending on RegTech systems, specifically, will increase from a quoted $18bn (₤ 14bn) this year to $115bn (₤ 100bn) by 2023.
Financial commitment is forecast to climb by an average of 45% per annum over the next five years, far higher than the 17% spent on compliance as a whole, reflecting a fast transformation away from traditional compliance procedures.
The Regulatory Compliance ParadoxThe aggregated cost of regulatory compliance across the financial sector is approaching $80BN globally. Yet compliance relevant threats continue being at all-time highs.
Why would this be? Just simply due to new regulations brought out immediately after the 2008 financial crisis mandate firms to collect, aggregate and report unparalleled quantities of data, and combine sophisticated regulations into their business operations. And yes, these types of rules obviously prone to diverging judgements and not consistently harmonised globally. But at the root of the enigma is the industry’s exceptional state of technology fragmentation: typically within a single organisation, the same data is exhibited in many different ways using many different systems.
This can frequently bring about highly complex regulatory applications that have escalated into uninhibited costs, even so without any certainty of compliance: precisely how do you prove adherence to a rule, when the logic is hidden deep into a maze of inconsonant systems? This obscurity also challenges regulators’ supervisory mandate and may probably damage market transparency.
Through this rise in intricacy and old-fashioned systems showing the existentialist and antique beliefs, it is estimated 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 entered into law earlier this year and could 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 assessing 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 most recent report argues that transitioning to cloud-based compliance is a “crucial precursor” to other regulatory 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 comes after Claranet UK found that more than half of the UK’s financial sector is right now struggling to understand and follow up on the customer data they collect.
Legacy systems are considered to be among the main reasons behind the findings, with cloud technologies indicated as a way of remedying the predicament. Traditional spreadsheet systems are full of inherent risks and need to be migrated to a more effective and scalable system, because as all of us know, if we don’t grow; our businesses, continue to adapt to new ways of functioning, our business will become hardly a footnote in history.
Lee Werrell
Compliance Doctor
