The Cambridge Centre for Alternative Finance (CCAF), Cambridge SupTech Lab, has shared a survey on the adoption of Suptech or Supervisory Technology, showing an increase in initiatives. CCAF and the Lab are both part of the Cambridge Judge Business School. CCAF is the leading global research institute studying the various aspects of Fintech.
According to the Lab, 81% of surveyed financial authorities indicate their involvement in various Suptech initiatives, an increase from the 71% reported last year.
As well, 76% of financial regulators state that speed of response is one of the biggest impacts of Suptech. These initiatives are also having a positive impact on consumer outcomes (52%)
In many respects, Suptech is one of the most promising aspects of the Fintech ecosystem. Financial services is one of the most highly regulated industries in the world. Yet compliance costs can be extreme and are on the rise. The ability of regulators to automate compliance can be beneficial to both regulated firms as well as regulators. Of course, the end user is the ultimate beneficiary as any compliance cost is passed on to them.
Simone di Castri, co-head of the Cambridge Suptech Lab, explains that the most impactful change that can be made in financial services is the digital transformation of regulators globally.
“Advanced Suptech solutions can help financial authorities manage the challenges presented by digitalisation, datafication, globalisation, and the diversification of business models. It can help them address pressing issues such as financial crime, fraud, exclusion, climate change enablers, consumer protection, and artificial intelligence biases. The results of our survey indicate that financial authorities are beginning to embrace the immense opportunities of Suptech.”
The recent survey also reveals:
- Foundational technologies of early suptech generations form the basis of most implementations. Descriptive analytics (83%), dashboards, on-premise relational databases, web portals (79%) and static reports (73.6%) persist in bolstering data quality, management, and overall efficiency in supervisory processes. But financial authorities are beginning to explore next-gen technology such as Generative AI, with 7.6% of respondents reporting having incorporated it into their suptech solution.
- Suptech use cases focus on prudential banking (69%) and consumer protection and market conduct (62%), followed by anti-money laundering/counter-terrorism financing and proliferation (AML/CFT/CPF) (59%), and cyber risk supervision (39.3%). Surprisingly, digital assets and cryptocurrency oversight is reported to be a priority for only 21% of responding authorities, and ESG for only 15%.
- A cultural shift is taking place alongside the digital transformation, with financial authorities creating new roles to drive suptech adoption, training staff, and collaborating across the supervisory ecosystem.
- Gender inclusion commitments are growing, with 45% of financial authorities now collecting sex-disaggregated data. 91.7% use the data to support the design of national financial inclusion strategies and establish specific objectives and targets for financial inclusion, and 79% use sex-disaggregated data to identify gaps in the access, usage, and quality of financial services. Financial authorities should expand data collection beyond demographics to gain more nuanced insights into gender-specific challenges.
Matt Grasser, Principal Technologist and a co-head of the Cambridge SupTech Lab, says they aim to be a catalyst for regulators adopting new technologies. At the same time, the adoption of new technology must be mindful of driving value.
The Lab surveyed 64 financial authorities, such as central banks, securities and capital market authorities, and insurance supervisors etc., from six continents. The Lab conducted the survey between August and November 2023.