With the market challenges of growing inflation, evolving user preferences, and competition, compliance and regulation technology continue to be a growing area of investment for financial institutions as they streamline their operations.
Spending on Regtech platforms is predicted to exceed $115 billion by 2023, up from an estimated $18 billion in 2018, with 52% of CFOs scaling up digital investments in 2023 in spite of the cost pressures facing their businesses.
With rapid changes in technology, working habits and customer expectations, firms are prioritising compliance as a major focus area for investment to reduce risk, manage resources and remain on the right side of regulators.
Key to this challenge is the role of data and communication in financial institutions.
Given the vast amount of information that firms hold, data is increasingly a strategic asset and requires a business-wide approach to data aggregation, management, storage, security, retrieval, and destruction.
To take advantage of these opportunities, institutions need to invest in tools that can prepare their systems to adapt with the market, as well as new regulatory pressures.
As the world becomes more digitised, regulators are taking successive steps to enhance the security of customer data both online and offline.
Customers increasingly expect to manage the majority of their financial activity online, raising new obligations for the institutions that guard and use their data.
However, only 11% of UK financial services firms say their programme of work to comply with the new FCA Consumer Duty regulations has been formally established.
This policy, along with other regulation such as GDPR, ISO 27001 and MiFID II, sets higher standards for the level of protection that institutions should provide for their customers, including:
This last point focuses on two key issues: encryption and authentication. However, traditional banking communications via paper documents fail to meet either of these standards:
A secure email service such as Mailock solves both of these issues:
From 2023, the FCA is likely to require financial institutions to report the environmental impact of all activities financed by every investment product, and for the clear justification of any sustainability claims made by said products.
However, the majority of firms are not currently equipped to meet these standards.
Many financial institutions lack visibility, data and acting-capability over the questions posed by this regulation, given the diverse nature of their portfolios and investments.
Key challenges include:
To report effectively on ESG progress to regulators, investors and stakeholders, financial institutions need streamlined tools to gather and process internal data, as well as being able to report on external activity and investments.
For external data, reporting platforms can connect data sources and front-end systems to gather and centralise ESG data for analysis and reporting. This can include:
Cloud computing is becoming increasingly attractive to—and indispensable for—financial organisations, but the move of large volumes of consumer data to public servers requires robust security and processes.
While cloud computing can ensure high levels of security and prevent data breaches, this requires vigorous endpoint management and IT policy management policies to be in place for users, managers and data teams.
85% of firms use or plan to use infrastructure-as-a-service (IaaS), an arrangement in which a vendor offers compute, networking and storage resources on an as-needed basis, meaning that provider choice needs to be secure, end to end and regularly updated.
Your choice of cloud provider should be able to demonstrate robust security including:
As financial institutions balance the needs of external and internal transformation, one of the first priorities should be to demonstrate innovation in a way that shows intention and dedication to Net Zero to clients and stakeholders.
One of the most efficient ways to promote this is by digitising and securing internal processes and client-facing communications.
Mailock is a secure, environmentally-aligned email solution specifically designed for the financial industry.
Institutions can leave paper behind, creating end-to-end secure communication channels for internal and external stakeholders to move data, documents, and gather information securely.
Mailock securely digitises key workflows, helping businesses to:
Find out more about how Mailock can help your organisation meet Net Zero targets.
Spending on Regtech Platforms to Exceed $115 Billion by 2023, Juniper Research, 2018
52% of CFOs Scaling Up Digital Investments, Gartner, 2022
FCA Consumer Duty Compliance Among UK Financial Services Firms, EY, 2022
Risk Management Software for ESG Investment Checks, Bryter, 2023
Abacus360 Banking for Regulatory Reporting, Regnology, 2024
85% of Firms Use or Plan to Use Infrastructure-as-a-Service (IaaS), Spiceworks, 2021
Sabrina McClune, 05.06.24
Sam Kendall, 05.06.24