That is with reference to a new report from Juniper Research, which predicts that spending on RegTech solutions, particularly, will increase from an approximated $18bn (₤ 14bn) this year to $115bn (₤ 100bn) by 2023.
Financial investment is forecast to grow by approximately 45% per annum over the next five years, far greater than the 17% invested in compliance as a whole, demonstrating an accelerated switch far away from traditional compliance methods.
The regulatory compliance paradox
The aggregated costs of regulatory compliance all over the financial marketplace is approaching $80BN globally. Yet compliance associated threats continue to be at all-time highs.
Why would this be? Simply due to new regulations launched right after the 2008 financial problems need firms to gather, aggregate and report unprecedented quantities of data, and incorporate intricate regulations into their business operations. And yes, these kinds of rules are open to diverging analyses and not always harmonised globally. But at the source of the enigma is the industry’s remarkable state of technology fragmentation: frequently within a single organisation, the same data is expressed in several ways through numerous systems.
This can frequently generate highly complex regulatory applications that have risen into uninhibited costs, still with no assurance of compliance: just how do you prove faithfulness to a rule, when the logic is hidden deep into a maze of diverse systems? This opacity additionally challenges regulators’ supervisory mandate and may probably harm market transparency.
By having this rise in complication and antiquated systems mirroring the existentialist and obsolescent beliefs, it is estimated that RegTech will represent 40% of businesses total compliance spending by the year 2023.
The findings come as businesses start complying to General Data Protection Regulation (GDPR), which entered into force earlier this year and could well hit companies 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 different technologies for estimated timescale of significance and costs barriers, Juniper concluded that cloud computing is currently probably 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 modern technology approaches, for example, 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 at the present time struggling to understand and act upon the customer data they gather.
Legacy systems are thought of as being among the main reasons behind the findings, with cloud technologies recommended as a way of remedying the situation. Traditional spreadsheet systems have lots of inherent risks and need to be migrated to a more powerful and scalable system, because as all of us know, if we don’t grow; our businesses, never cease to adapt to new ways of functioning, our business will become barely a footnote in history.