That is with reference to a new report from Juniper Research, which anticipates that spending on RegTech platforms, particularly, will increase from a quoted $18bn (₤ 14bn) this year to $115bn (₤ 100bn) by 2023.
Financial investment is forecast to go up by approximately 45% per annum over the next five years, far greater than the 17% invested in compliance as a whole, reflecting a quick transfer away from traditional compliance solutions.
The regulatory compliance paradox
The aggregated cost of regulatory compliance throughout the financial industry is reaching $80BN globally. Yet compliance specific risks are still at all-time highs.
Why would this be? Just simply due to new regulations put forward just after the 2008 financial problems call for firms to accumulate, aggregate and report unmatched volumes of data, and include sophisticated principles into their business operations. And yes, these types of rules are open to diverging interpretations and not consistently harmonised globally. But at the origin 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 numerous systems.
This can frequently lead to highly complex regulatory implementations that have advanced in to uninhibited costs, still without any assurance of compliance: precisely how do you prove adherence to a rule, when the logic is buried deep into a maze of dissimilar systems? This opacity also tests regulators’ supervisory mandate and might probably damage market transparency.
With this rise in complexity and antiquated systems mirroring the existentialist and antique views, it is approximated 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 entered into force earlier this year and could possibly 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 many technologies for anticipated timescale of significance 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 modern technology approaches, for instance, 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 over half of the UK’s financial sector is at this time struggling to understand and follow up on the customer data they gather.
Legacy systems are considered as being among the main reasons responsible for the findings, with cloud technologies indicated as a way of remedying the predicament. Traditional spreadsheet systems have plenty 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 working, our business will become scarcely a footnote in history.