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Since the beginning of 2022, we have seen some significant and unforeseeable changes in the global markets. The after-effects of the global pandemic, continued Brexit implications, and the ongoing war in Ukraine have together created a volatile economic climate - impacting most industries. 

Inflation is rising and hiring is a growing challenge across the board. In fact, for the first time on record, there are more job vacancies in the UK than there are people unemployed. 

These changes signal hard times ahead and will of course have an impact on RegTech, a sub-sector within the FinTech industry. However, despite the challenges this will bring, I am confident that the sector will pull through for a number of reasons. Firstly, regulatory pressure is increasing, which in turn is driving the need and demand for RegTech. Secondly, as inflation rises and budgets get cut, the role of technology to automate processes and free up resource will become even more important – also increasing the need for RegTech.  

As such, I believe that many of the predictions I made for RegTech in 2022 at the end of last year still stand, including:   

• on-premise deployments will become a thing of the past;

• continued regulatory change will drive a more holistic compliance agenda;  

• increased enforcement action will continue to be a growing risk; and 

• flexible working will continue to evolve

Move over on-prem, the cloud is here, and it is taking over:

For financial firms, cloud capabilities can greatly enhance compliance operations because of the speed, scalability, and flexibility it offers. This is widely recognised and cloud deployments are increasingly becoming the standard for RegTech, so much so that most vendors are now discontinuing their on-prem systems and migrating clients onto their newer cloud-based platforms. There are only a small number of firms that still cling to the idea that on-prem deployments are more stable or secure than the cloud. As more and more RegTech vendors shift to hosting their solutions in the cloud, the industry simply won’t have the option of on-prem solutions anymore, leaving them no option – if you can’t beat them, join them. 

Regulatory change driving a holistic agenda:  

Results from our annual compliance health check report, launched June 21st, clearly show that managing regulatory change is one of the most common challenges financial firms grapple with today. However, the report also indicates that areas of investment focus more on individual compliance areas rather than holistic capabilities. While we know that holistic compliance eases the impact of regulatory change significantly, it is likely that the industry is not quite ready to embrace its possibilities just yet. However, it will be the direction of travel for compliance in the coming years.

The evolution of flexible working:

Our annual report also uncovered that, in addition to regulatory reporting, communications and trade surveillance are the highest compliance priorities for financial firms today. This is unsurprising given the fact that firms have come under intense scrutiny from regulators to improve their trade and communications monitoring processes in light of the shift to hybrid working - which has forced many firms to upgrade their policies and procedures for employee monitoring. But is hybrid or flexible working here to stay? This is hard to tell. We are still seeing many firms supporting flexible models. However, we are now seeing companies that have started to ask their employees to come back to the office full time, and I suspect we will see continued evolution in this space over the coming years.

Despite the seismic changes we are seeing in the global economy, the obligation for financial firms to comply with regulations doesn’t simply go away. There is little sign that regulatory enforcement action is slowing down. In fact, on the contrary, regulators seem more determined than ever to ensure that compliance is being carried out effectively and robustly correctly. As a result, I have a positive outlook for RegTech despite the challenging times ahead.  

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