Clausematch announced the publication of its ‘Voice of RegTech’ survey. The survey, which was the first of its kind by the company - was carried out between May 2020 and May 2021 with support from the UK Financial Conduct Authority (FCA). A key objective of the study was to gain a better understanding overall of the impact of the Covid-19 pandemic on the RegTech industry.
Almost 40 firms from across the US, Asia, the Middle East, the UK, Australia, and Europe, took part in the survey. These firms ranged from well-established businesses with upwards of 200 employees to smaller businesses, and early-stage start-ups with less than a handful of employees in some cases. The survey respondents were largely CEOs or company founders.
The findings of the survey revealed the following key developments:
- The RegTech industry has seen an uplift in sales trends during the pandemic
- Financial institutions attitudes towards technology are evolving rapidly
- Pressure is increasing for regulators to adopt regulatory technology
- 92% of RegTech firms said that the pandemic has positively impacted the adoption of cloud-based products.
More than 42% of the RegTech firms that participated in the survey reported seeing a sharp rise in sales trends across the industry over the last six months. This is due to changes in working practices throughout the pandemic which have increased demand for innovative RegTech solutions to improve collaboration and boost efficiency.
Unsurprisingly, the findings of the survey also showed that 50% of demand from all new business for the RegTech industry is from banks. It is a well-known fact after all that traditional financial institutions such as banks have been amongst the slowest to embrace new technologies including the secure cloud. This is likely because of privacy threats traditionally perceived to be associated with cloud-based technology, such as a risk in cybersecurity hackings.
However, this study has demonstrated how attitudes are quickly changing despite previous reluctance. Of those surveyed, 92% of RegTech firms said that the pandemic has positively impacted the adoption of cloud-based products. The outdated processes and legacy technology previously enjoyed by financial institutions are no longer suitable to meet the heavy demands of today’s regulatory landscape.
In terms of compliance trends, the most dominant trend throughout the pandemic was the increase in remote compliance. 92% of RegTech firms said that they had to shift to a remote working model during the pandemic, while 8% said that they were partly remote working. This new style of working has created new risks for compliance teams. For example, as a result of remote working during the pandemic, many employees have turned to unmonitored communication apps such as WhatsApp to share sensitive information. Survey participants also reported that the pandemic has caused a rise in virtual Know-Your-Customer (KYC) checks, and boosted demand for a streamlined process. RegTech solutions bring everything that a company needs to conduct its business together on one, safe and secure platform.
As financial institutions turn to technology to increase efficiency and ease the compliance burden, there is an increased demand from RegTech firms on regulators to adopt regulatory technology. This can be seen in findings of the survey when participating firms were asked to what extent they would like to see the Regulator take a more proactive role in the promotion of RegTech solutions. The answers were as follows: 15.4% of participants said they wished to see the Regulator take a less active role, 21.3% of participants said they would like to see the Regulator remain moderate in its efforts, and 61.5% of participants said they would like to see the Regulator being considerably more proactive in adopting RegTech.
These findings of the Voice of RegTech survey reveal that the impact of the pandemic on RegTech has been significant, with heightened demand for innovative solutions within the financial services industry and to address the challenges created by the pandemic for compliance teams. RegTech solutions are providing the answers to the difficult questions that more and more businesses find themselves faced with in the current climate of uncertainty.