Juniper Research: Complex Regulatory Requirements Are Driving Corporates to Adopt a Range of Technologies to Facilitate Compliance

Regtech is a rapidly evolving area of technology, especially in a world that has a constant increase in demand for regulatory compliance, according to an update from Juniper Research.

Regtech offers solutions to businesses in response “to an increasingly digitalized world that boomed since the start of the COVID-19 pandemic,” the report from Juniper Research explains.

Juniper Research points out that they use the UK FCA’s definition of Regtech, which is essentially described as: “a subset of Fintech that focuses on technology that may facilitate the delivery of regulatory requirements more efficiently and effectively than existing capabilities.”

According to comprehensive report published by Juniper Research, Regtech is “a broad industry that can help businesses protect themselves from fraud and comply with regulatory requirements, leading to an increase in demand for automated and cost-effective solutions.”

However, due to an increase in the demand “for regulatory compliance globally, sectors other than finance have also seen an increase in regtech companies.”

Some examples “include eCommerce, cybersecurity, healthcare and gaming.”

Digital onboarding and how “to onboard remotely in a safe and user-friendly way that meets KYC requirements has become of critical importance in recent years.”

The report further noted:

The origin of regtech can be traced back to the fallout of the global financial crisis of 2008, which caused a contraction of liquidity in global financial markets. In response to the crisis, the Dodd-Frank Wall Street Reform and Consumer Protection Act was enacted in 2010; creating several changes to the way banks operate. Dodd-Frank amended many existing rules and created many new standalone provisions, with the aim to identify and respond to emerging threats before they cause widespread damage to the financial system.”

The report added:

“In more recent years, there have been global changes in regulations to data privacy, with well-known examples such as GDPR (General Data Protection Regulation) and FINRA (Financial Industry Regulatory Authority). Failure to oblige with these regulations can result in heavy fines for companies. Although characteristics of these payments may vary in country, region, and trade corridor-specific settings, they have overarching commonalities and face location and customer-agnostic challenges.”

As mentioned in the report, the trend of increased digitalisation following the COVID-19 pandemic “has continued, with notable growth seen in the financial services sectors, eCommerce, healthcare and cybersecurity.”

The adoption of regtech solutions can be “attributed to an increased level of crime putting customers, patients and businesses at risk.”

Regtech solutions offer “deployment of highly automated and user-friendly methods which can assist large financial institutions to small start-ups.”

The main applications for regtech platforms include:

  • Improve efficiency and effectiveness: Reducing the time needed for customer
    onboarding and KYC verification.
  • Detect fraud and improve security: Identifying fraud an aud and potential data security risks.
  • Adaptation: Adapting to new regulations and staying compliant

Regtech spend will “surge to $207 billion globally by 2028, with AI & machine learning
unlocking efficiencies.”

Spend on regtech by financial institutions and other industries “will increase by 124% between 2023 and 2028 globally, from $83 billion in 2023.”

As noted in the research report:

“Increasingly complex regulatory requirements are driving corporates to adopt a range of new technologies to facilitate compliance. New approaches include the use of shared blockchain ledgers to improve anti-money laundering and fraud compliance at cryptocurrency exchanges. Natural language processing is also used to detect malicious actors in emails and phone calls, successfully identifying misconduct, conflicts of interest and financial crime. With increased deployment of these technologies, we anticipate increasing levels of enterprise investment, as they recognise the vast efficiencies regtech can create.”

The research found that “the leading players offered streamlined identity verification automated by AI, and were able to successfully position themselves in many different industries, as regtech expands beyond just financial services.”

In order to stay ahead of their competition, vendors must “develop solutions that utilize AI and machine learning, which can automate processes such as identity verification.”

The report concluded:

“The most successful vendors will leverage AI to reduce the manual requirements
needed by compliance teams and allow them to focus on tasks that require human
elements, lowering costs and increasing productivity significantly, at a time of
strong cost pressures.”

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