The Regulatory Technology Arms Race
Why compliance innovation will determine the next generation of financial winners
The financial services industry is experiencing a level of regulatory intensity rarely seen before and the impact from this intensity is being felt across the sector. But viewing regulation purely as a cost center misses the enormous competitive opportunity it represents for forward-thinking financial institutions.
Banks should also look out for SEC movements towards mandated reporting on climate matters (anticipated in early 2024) and the New York State Department of Financial Services plans to issue a request for information from regulated institutions about their proposed plans to assess and manage climate-related financial and operational risks. The regulatory landscape is becoming more complex, but also more predictable.
Integrating systems and streamlining manual workflows is essential, as evidenced by technology integration and platforms being cited as the top investment priority for banks in 2024. The institutions that are treating regulatory compliance as a technology innovation opportunity rather than a compliance burden will gain significant competitive advantages.
While cryptoassets are still largely unregulated in a number of jurisdictions, regulators internationally are taking emphatic steps to bring cryptoassets within the scope regulation. 2024 promises to be a busy year in this regard. The companies that can navigate these evolving regulatory frameworks efficiently will be positioned to capture market share from competitors struggling with compliance costs.
The winning strategy isn't just about meeting regulatory requirements—it's about building regulatory technology capabilities that become competitive moats. Institutions that can automate compliance reporting, predict regulatory changes, and adapt their operations quickly will have lower costs and faster innovation cycles than their competitors.
Bank regulations have ballooned since the 2008/9 Financial Crisis. We expect more collaboration among banks, central banks and regulators to work more effectively together. The firms that position themselves as collaborative partners in regulatory innovation rather than resistant subjects will shape the rules of tomorrow's financial services industry.
Sources:
KPMG Banking Trends 2024
White & Case Financial Institutions Outlook 2024
Docusign Financial Services Trends 2024
Accenture Banking Trends 2024