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Will Regulating RegTech Benefit the UK’s Financial Services Industry in the Long-Term?

Authored by: Tony Clark, Managing Director- Business and Management Consultancy

As the regulatory burdens on banks and other financial services firms increase year-on-year, not only through the volume of regulation but also the cost of compliance, it is unsurprising that across the industry we are seeing innovative technological solutions to help address such demand.

The industry response is two-fold: we are seeing FinTech and RegTech start-ups developing solutions to specific regulatory demands, which are being picked up by the banks as part of their own regulatory stack or the banks are investing in the start-ups themselves. In parallel, many financial services firms are developing and using their own innovation labs as somewhere they can trial technology themselves, in a sandbox environment. Where such technology fails a test of suitability, the innovation lab environment allows that to happen quickly without impacting production environments.

Responses by banks to regulation to date have been predominantly reactive - constantly having to change their existing platforms and applications to meet ever-changing regulatory demands. Whilst it is no doubt difficult to adapt to the sheer volume of regulation from various domestic and international regulators and bodies, the current situation must change. This is where well-thought-out FinTech and RegTech strategies will lead the way in assisting financial services firms manage multiple regulatory demands at the same time, meeting regulatory compliance as part of their core offering. We might also see the next generation of core front office applications which alongside offering accurate pricing, accurate risk and timely execution, are providing regulatory compliance as part of their default offering, particularly in areas of trade or transaction reporting, risk and conduct or capital management.

As banks and FinTech start-ups start to utilize and become comfortable with emerging technologies such as AI or cloud-based services as part of their agile approach, RegTech solutions are becoming increasingly innovative, utilising technology that would have been off-limits to the bigger banks before.


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