SteelEye survey finds 85% plan to invest same or more in RegTech in next 12 months

Rick Steves

Regulatory reporting came as the top investment priority for compliance professionals in the UK, while surveillance is the top priority in the US, particularly among banks.

A survey conducted by regtech firm SteelEye found that almost half of firms (44%) are planning to invest more in RegTech solutions in the next 12 months and a further 41% expect to invest the same amount as the previous 12 months.

Investment in compliance solutions addresses the growing pressure from the complicated regulatory and operational landscape, which is driving up the overall cost of compliance. Almost all (90%) of financial services firms reporting increased compliance costs over the past five years, said the report, adding that one in ten said costs have doubled.

These findings were published in SteelEye’s Annual Compliance Health Check Report, and data was gathered from 170 senior financial services compliance and risk professionals in the UK and US, who have participated in the survey.

Respondents were asked to provide their opinions on issues including the challenges they face, investment priorities and technology adoption in order to get a picture of the financial services compliance landscape today.

85% to invest same or more in RegTech in the next 12 months

Matt Smith, CEO of SteelEye, said: “Our first Compliance Health Check Report demonstrates the breadth and complexity of challenges facing today’s compliance professionals. Keeping abreast with regulatory change, improving data quality and managing risks and controls within the business are just some of the headaches facing compliance teams.”

“The good news is that firms are clearly beginning to recognise the role technology can play in solving complex compliance challenges. In fact, 85% expect to invest the same amount or more in RegTech in the next 12 months.”

“Technology and data are key to establishing future-proofed compliance processes and procedures. It is great to see that a large proportion of firms view the enhancement of data quality as a top priority and that most firms are actively investing in technology. By prioritising how to bring together disparate datasets and make better use of data firms can more easily address regulatory change and other compliance challenges that will emerge down the line.”

“We are hopeful that these investments will enable compliance teams to improve the efficiency of their compliance programs – thereby reducing their reliance on administrative and repetitive tasks. Doing so can enable the compliance function to pivot from reactive investigations and firefighting to a more proactive model for compliance management and risk detection.”

Challenges for compliance professionals include overlaying communications and trades to manage market abuse risk, using Management Information (MI) efficiently to demonstrate risk, and consolidating and normalising of structured and unstructured data.

Keeping up with regulatory change is the biggest challenge in meeting regulatory obligations for A fifth of (20%) of firms.

How to deal with regulators?

While 42% said regulators are now more challenging to deal with, 48% said they now find it easier to deal with the regulator. This could in part be due to technology making compliance processes more streamlined and straightforward. Small firms1 find it more challenging at 58%.

When asked if they think firms are well equipped to handle more stringent regulatory rules over the next five years, encouragingly, most respondents (75%) believe financial services firms are in a good position.

Half of respondents said at least half of compliance staff within their firm do administrative or repetitive tasks, which points to the need for automation and digitalisation within the sector.

Regulatory reporting came as the top investment priority for compliance professionals in the UK, while surveillance is the top priority in the US, particularly among banks.

“This is unsurprising given the fact that US regulators are clamping down hard on communications rules. Last year’s headline-grabbing $200 million fine for J.P. Morgan by the Securities and Exchange Commission (SEC) demonstrated the importance of adequate monitoring of employee communications”, said the SteelEye announcement.

In regard to AI or machine learning, 31% of firms said they have fully implemented such compliance solution, and 100% of those who have fully implemented AI for compliance claim they have seen a marked improvement in the quality of their Management Information.

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