FinTech and RegTech are poised to dramatically change the financial industry, although firms aren't yet sure how specifically that change will happen.
Financial services firms and their compliance functions have long embraced technical change and development, but in the past few years, the pace and scale of that change have accelerated dramatically. That has left the industry feeling certain it needs to adapt, but not quite sure how.
Around the world, financial firms are warming up to the reality that regulatory technology (RegTech) and financial technology (FinTech) are going to change the professional landscape. In fact, many of them are quite excited to see what these capabilities bring. However, they haven’t yet updated their legacy systems to handle such vast changes, and the amount of money available to find and fund FinTech and RegTech solutions varies widely across the world.
Those are among the findings of “FinTech, RegTech and the Role of Compliance in 2017,” Thomson Reuters second annual survey of financial professionals and how they relate to RegTech and FinTech. Worldwide, almost 800 financial firms responded to the survey. Their answers show the ways in which the financial industry is – and isn’t – weaving powerful new capabilities into its business model.
Warming up to FinTech and RegTech
In 2016, 16 percent of respondents said they felt no need to be involved in FinTech. This year, just 2 percent of respondents answered the same. That indicates the risk and compliance field has accepted that FinTech and RegTech are going to become fixtures of global business (although it has not necessarily formed consensus on how they will operate once they become mainstays).
Sixty-nine percent of respondents believe they can use RegTech and FinTech to improve efficiency and reduce the cost of doing business, and 36 percent believe these technologies may eventually lead to less manpower and time needed to complete compliance tasks. Interestingly enough, 27 percent of respondents said they need “more resource to evaluate, understand and deploy FinTech/RegTech solutions.” That underscores the impression that even as excitement and interest in FinTech and RegTech grow, they are still seen somewhat as curiosities with intriguing, but unclear, application.
Updating legacy systems
Sixty-one percent of respondents said they were “mostly confident” their IT infrastructure was able to support RegTech and FinTech capabilities with only minor upgrades needed. However, when the 10 percent of 2017 respondents who said they felt “not very confident” they were up to the same task are considered, it appears there is progress to be made before it can be said RegTech and FinTech are fully integrated into the industry.
Finding room in the budget
It takes money to make money, as the saying goes. Accordingly, it also takes money to regulate the money industry. That’s why it’s good only 9 percent of respondents reported having no budget for RegTech; just last year, that figure stood at 24 percent. Even more encouraging, 38 percent of respondents expect their budget for RegTech solutions to grow in the next 12 months. That’s up slightly from the 35 percent who said the same in 2016. at the other end of the spectrum, the number of firms that reported having no budget for RegTech has dropped significantly from 24 percent in 2016 to 9 percent in 2017.
Overall, the results of “FinTech, RegTech and the Role of Compliance in 2017” show an industry that has acknowledged FinTech and RegTech are coming, and are going to reshape the status quo, but is not quite ready to embrace them.
Thomson Reuters Regulatory Intelligence helps professionals stay abreast of their quickly shifting, globe-spanning industry.