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What does technology mean for risk and compliance?


As a sizeable, and growing, portion of the financial services sector - risk and compliance plays a vital role in ensuring that firms conduct business safely, sensibly and in a way that complies with the slew of financial regulations in the market. As one of the top financial sectors in the world, the UK contributed £119bn to the British economy last year (50% of which came from London), and growth shows no sign of stopping anytime soon. British financial firms handle huge amounts of money and sensitive information every day, and having a strong risk and compliance team is essential for those who want to navigate pitfalls smoothly, grow their business and of course avoid sparking another financial crisis.

However, the changing market is also ushering in a new wave of regulations, challenges and opportunities for the sector. With huge advances in technology changing the way in which we work, live and do business, more and more organisations are making the switch to the digital economy, employing new platforms, new software and new methods of making and exchanging money faster and more efficiently than ever before.

As a result, the industry is having to adapt to doing business with tools that still aren’t fully regulated, but this represents opportunity as much as danger. With new technologies springing to the forefront that could actually make risk and compliance safer than ever before, the industry is in a state of flux.

Here are some of the biggest changes on the way:


Since first being developed in 2008, blockchain has become a hugely popular way for the heavily-regulated banks to transfer currency in a transparent, efficient and reliable way. Currently, each firm keeps its own records of financial transactions on a ledger that it then reports to regulatory authorities; inevitably, this leads to complications and a lack of transparency.

Blockchain is revolutionising this, through the very way in which it is constructed. It is an automatic, online ledger where the industry and regulators can both access transaction records, and where all transactions are locked into a ‘link’ which is impossible to tamper with. As a result, regulatory authorities can easily access all of the information they need, creating an inter-operable environment where risk is reduced, as well as the threat of fraud. Though it would require financial institutions to accept a decentralised method of control, blockchain holds great promise as a form of technology that can offer a safer, smarter way of financial innovation, which is also automatically compliant.


The UK is currently somewhat of a RegTech hotbed, thanks to generous investment from the government, and RegTech is helping to pioneer a simpler way for financial companies to remain compliant and low risk. With new changes like MiFID II and GDPR, around 250 regulatory changes take place every day: RegTech companies aim to solve this by creating a simplified system that’s optimised to help firms and institutions comply with all the new regulations being ushered into law.

With numerous RegTech firms specialising in different areas of the market, from Tax Management to Financial Services, the software that they create uses machine learning and AI to extensively map the relevant data and offer both banks and FinTech companies solutions that are tailored to them, which will, in turn, enable them to conduct business in a more compliant way.

Though it’s currently in the starting blocks, there’s been a surge in demand for talented programmers and developers in this area, and a recent survey by Thomson Reuters Regulatory Intelligence stated that 75% of respondents had a positive view of RegTech, so it will likely become much more popular over the coming years.

Making payments

The payment revolution has well and truly landed. With apps like ApplePay and Google Wallet making it easy for people to pay with a wave of their smartphone, new developments like fingerprint scanners and voice and facial recognition is paving the way for an upheaval in consumer authentication. It will even make transactions more secure, thanks to the fact that the vendor never receives a customer’s credit card details. Might we soon be able to pay for things with just our fingerprints?

These developments are going a long way to tackling credit card fraud, but also raise a whole host of new issues. Cryptocurrencies, mobile payment services and B2B, are all subject to domestic rules and regulations, but due to their rapid spread, many still remain unregulated. Though efforts are being made to tackle this, keeping up with this will likely be a major concern for risk and compliance companies over the coming years.


What bigger risk is there to financial firms than cybercrime? 86% of financial services companies across the UK, US and Europe plan to spend more money on it, which is unsurprising, especially given that the financial sector is one of the most affected by it in the economy. With new ways to process money and data have come new ways to steal it, and tackling this surge in online crime is becoming an increasingly important component of any Risk and Compliance team.

However, AI and machine learning are already taking steps to tackling this: by using algorithms to detect anomalous patterns and predict outcomes, AI’s self-learning abilities make it a great tool for detecting threats, and businesses across the UK are being encouraged to adopt it to reduce risk to their business. There’s no doubt that technology will become an important part of any risk and compliance team’s arsenal in the next few years: now, the emphasis will be on these teams to update their software to keep pace with the changing market.

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