Why accelerating RegTech adoption is a gamechanger

This article is part of our Opinions section.

In the ever-evolving landscape of finance, RegTech (the management of regulatory monitoring, reporting and compliance within the financial industry through technology) stands as a beacon of innovation and efficiency.

Yet, despite its potential to enhance and streamline compliance processes and mitigate risks, some sections of the UK’s finance sector have been slow to wake up to the benefits it brings, preferring instead to stick with what they know – manual-based processes.

Regulatory compliance is not merely a box-ticking exercise; it’s the cornerstone of a stable and trustworthy financial system. But these traditional compliance methods often prove cumbersome, costly and, crucially, prone to human error.

When you consider the financial and reputational costs of non-compliance (just ask Deutsche Bank, it was slapped with a $186 million fine for inadequate efforts in addressing money laundering just last year), RegTech is the obvious answer. By harnessing the power of advanced technologies like artificial intelligence, machine learning and blockchain, RegTech offers solutions that streamline compliance processes, enhance accuracy, reduce operational burdens and crucially support the entire sector’s fight against financial crime.

So, why does accelerating RegTech adoption matter?

First and foremost, it’s about safeguarding the integrity of the financial sector. The UK’s reputation as a global financial hub hinges on its ability to uphold the highest standards of regulatory compliance. By embracing RegTech, financial institutions can strengthen their compliance frameworks, detect and prevent financial crimes more effectively, and foster greater trust among investors and consumers alike.

RegTech adoption is also becoming more essential for maintaining competitiveness in an increasingly digital world. As technology continues to reshape the financial landscape, those who fail to adapt risk being left behind. By investing in RegTech solutions, UK firms can enhance their operational efficiency, reduce compliance costs and gain a competitive edge in the global marketplace.

Accelerating RegTech adoption aligns with broader policy objectives, such as promoting financial inclusion and innovation. By automating routine compliance tasks, it frees up resources that can be redirected towards more strategic initiatives, including expanding access to financial services for underserved populations and driving fintech innovation.

However, realising its full potential requires concerted efforts from industry stakeholders, regulators and policymakers.

Fostering collaboration: encouraging collaboration between financial institutions, RegTech firms, regulators and academia to share best practices, promote knowledge exchange and drive innovation will be key to its widespread adoption.
Regulatory support: providing regulatory guidance to facilitate the development and adoption of RegTech solutions, and ensuring compliance with evolving regulatory requirements will also be fundamental.
Incentivise investment: offering tax incentives, grants or regulatory relief could be a great way to incentivise financial institutions to invest in RegTech solutions and promote a culture of innovation.
Education and training: investing in training programmes and professional development initiatives will enhance the digital literacy and technical skills of compliance professionals, enabling them to more effectively leverage RegTech tools, and therefore be less resistant to change.

The future

Accelerating RegTech adoption is not just a matter of technological advancement, it’s a strategic imperative for the UK financial sector. By embracing RegTech solutions, we can strengthen regulatory compliance, enhance competitiveness, promote financial inclusion and drive innovation. The time to act is now so we can seize the opportunity to shape a more resilient, efficient and trustworthy financial ecosystem for the future.