Our biggest takeaways from the City of London RegTech Report 2021.
28th April 2021 by Brielle Hewitt
Is 2021 the year that will see the true emergence and adoption of RegTech in the Financial industry?
The future is already here, it’s just not evenly distributed, as the saying goes. This certainly seems to be the case when it comes to RegTech adoption, according to the latest report from the City of London Corporation and RT Associates.
The report consists of the key findings of a survey of 125 vendors, followed by a series of roundtables, and gives an insightful look into the state of Regtech in the UK.
In reading the report, we were struck by the number of key issues it echoed that we have been focused on for some time now, such as the need for leadership and cultural change to drive adoption.
We would encourage anyone in the industry to read the report for themselves, but we also wanted to summarise what we see as the most impactful findings.
More work is needed on encouraging adoption.
The report found that, while many believe the Covid pandemic has had a positive impact on RegTech adoption, investment firms still have a long way to go. More than 85% of those surveyed agreed that RegTech could help to navigate the challenges posed by Covid-19, but despite this, almost half of those surveyed described the current level of adoption as ‘moderate’, with a further third describing adoption as ‘low’.
The main problem here is awareness, RegTech is often treated as part of FinTech, when it deserves to be treated as a sector of its own. We have written previously about the challenges of knowing where to start when looking to adopt technology. Too often firms simply aren’t aware of what is out there and how it can help them.
This is a key reason for our work with The Broker Club, we are seeking to build a community around regulatory technology that can help to boost the message to the wider industry.
Improving adoption levels requires a change in approach for firms, as even those who are trying to adopt new technologies find themselves running into internal obstacles in the form of long procurement cycles, challenges navigating internal bureaucracy and the constraints imposed by the legacy systems already in place.
We know from experience how painful these challenges can be. Indeed, Our CEO James Hogbin highlighted the need for interoperability to create adaptable systems in our recent roundtable on future proofing firms.
Regulatory leadership is needed.
Of course, this is only half the battle. Compliance professionals can often face a difficult task in knowing how to best adhere to principles based regulation, and this lack of regulatory clarity can lead to herding behaviour among firms – never a good place to start when you’re trying to foster a spirit of innovation.
Unsurprisingly, then, 69% of vendors surveyed called on regulators to actively encourage the adoption of RegTech solutions for the supervisory process. Regulators are understandably hesitant to champion one particular type of technology over another, but vendors ranked a clear stance from regulators as the number one remedy.
One proposed solution is the creation of a new testing and accreditation centre, which we would welcome as a way to give firms clarity on which technologies can help them ease their regulatory burden.
Even small firms can have a big impact.
At the most basic level, the promise of almost any technology is a drastic increase in efficiency, but this can work against technology providers when looking to win adoption from firms. 44% of the respondents to the survey were smaller providers – those with less than 50 full-time employees – and they can find themselves losing out to more established providers even where these larger players are seen as less innovative.
This is an unfortunate side effect of well-intentioned risk management in the procurement process, where firms look more favourably on providers seen as more stable or with a longer track record.
This is another area where accreditation can help, but also simple awareness. We have spoken about the need for upskilling and continuous learning, and part of that comes from simply staying up to date as new solutions become available.
We are heartened to see the RT Associations in partnership with City of London doing such important research into the state of RegTech in the UK, but it cannot end here. The report contains many sound recommendations that, if implemented, could change the face of UK RegTech, and by extension the UK’s financial industries. We will continue to fight to raise the profile of RegTech, and encourage the whole industry to join us!
RegTech and it’s impact on the industry is only going to grow from here. If you would like to know how we can put your firm on the cutting edge with our Communications Monitoring RegTech solutions, please contact Sean Morgan – firstname.lastname@example.org.