The City of London Corporation has called for urgent action to tackle barriers to the growth of regulatory technology, including the establishment of a collective ‘industry voice’ to represent the United Kingdom regtech sector.
The Corporation, the governing body of London’s ‘square mile’ financial district, has published a new report which it says illustrates the lack of understanding between policy makers, regulators, regtech firms and financial institutions which is a barrier to regtech adoption.
The report, titled 2021: A Critical Year for Regtech UK, said financial regulators and financial institutions who were interviewed viewed adoption as ‘low’ to ‘moderate’, despite there being a ‘high quality’ vendor market. Almost half of regtech vendors viewed the current levels of RegTech adoption in financial institutions to be ‘moderate’ with a third of respondents classing the level as ‘low’.
However, vendors with solutions for fighting financial crime are “more bullish” with 78.8% of vendors in this category considering RegTech adoption to be ‘high’ or ‘moderate’.
The report offers a set of 12 recommendations aimed at helping the sector to grow and thrive (see full list below).
The recommendations include building awareness about regTech’s ability to scale through an independent testing and accreditation regime; regulators adopting a tech embracing stance to advocate for improved standards and the establishment of a “coherent and collective voice for the industry” to represent the UK regtech sector.
The report – which was produced in partnership with regtech Associates – draws on data from a survey of 161 global regtech firms, sector roundtables and qualitative interviews with global financial institutions and regulators. It finds that over 85% of regtech companies believe the sector will have a crucial role to play in helping firms navigate the challenges posed by COVID-19 and will generate opportunities for increased efficiency, more effective processes, and cost-savings for business.
Catherine McGuinness, Policy Chair at the City of London Corporation, said:
“As we look to kickstart a strong, sustainable recovery post-pandemic, building on the UK’s leadership in technological innovation will be key.
“The regtech industry has huge potential to boost efficiency and productivity in the financial sector as well as creating new jobs.”
The report comes after a report by Juniper Research earlier this month found global spending on regtech will nearly quadruple to $130bn by 2025 as banks increasingly look to Artificial Intelligence (AI) solutions for onboarding and to meet Know Your Customer (KYC) requirements.
At-a-glance: the City of London Corporation’s broad recommendations
- Establish a vision for regtech through a strategy-led approach
- Build awareness in regtech’s ability to scale through an independent testing and accreditation regime (high priority)
- Bridge the talent deficit by focusing on regtech skills & education
- Regulators to adopt a ‘tech embracing’ stance to advocate for improved standards for technology driving regulatory compliance in firms (high priority)
- Regulators to provide clearer guidance regarding technology risk management and expectations of what ‘good’ looks lik
- Accelerate work to establish standards in data and regulatory rules to move towards a digitally-enabled regulatory framework
- Establish a coherent and collective voice for the UK regtech industry to improve the representation of the industry
- Improve awareness and transparency of the benefits of regtech
- Provide better access to finance for UK regtechs
- Improve board education, awareness and responsibility for regtech
- Provide financial institutions with incentives to upgrade from legacy technology to newer, more efficient systems
- Reduce barriers to scale by streamlining vendor selection and procurement processes