Why RegTech is the industry to watch in 2023

Paul Roche our consultant managing the role
Author: Paul Roche

In 2022, we saw a wide range of regulatory developments, with emphasis placed on areas like environmental, social and governance (ESG), the planned implementation of a new Consumer Duty, the Appointed Representative (AR) regime and the Future Regulatory Framework (FRF).

As we enter 2023, another area to keep your eyes on is RegTech. The Global RegTech Market size is expected to reach $22.3 billion by 2027, rising at a market growth of 19.8% compound annual growth rate during the forecast period. 

Although not a new concept, RegTech, or Regulatory Technology, is changing the game and will disrupt the regulatory landscape by providing technologically advanced solutions to the ever-increasing demands of compliance within the financial industry. We’ve taken a look at why RegTech is the industry to watch in 2023.

What is RegTech?

Ultimately, the objective of Regulatory Technology is to help businesses adhere to rules more efficiently and cost-effectively. This is enabled through advanced technology, including through the use of innovations such as machine learning, biometrics, and blockchain. 

Just like in all sectors, financial services companies are increasingly demanding the streamlining of regulatory processes and technology is providing an efficient pathway to do so. In the UK, there has been generous investment into RegTech from the government to help financial services companies remain low-risk and compliant. It’s a rapidly growing and agile sector, but is it all plain sailing? 

What challenges are regulatory professionals facing?

We are noticing a few challenges that regulatory professionals, particularly in Financial Services are facing. Insufficient governance, for example, is proving to be difficult to overcome, along with poor integration into technology ecosystems. These challenges can cause delays which can subsequently be costly, both of which RegTech in essence seeks to avoid. 

There have also been challenges with the loss of data integrity. This relates to data corruption, whereby unwanted or unexpected changes to data take place during storage, access or processing.

Additionally, there have been challenges with limited control of master data between functions. Master data represents all the data critical to the operation of a business, for example, customer information, which could result in losses to the business if missing or mismanaged. 

What reporting regulations are changing in the banking and investment space?

According to the Bank of England in 2021, the Prudential Regulation Authority (PRA) is making changes to regulatory reporting requirements. Regulators are now looking to technology to revolutionise their approaches in banking and investment. 

In the UK, for example, the Financial Conduct Authority (FCA) is partnering with numerous financial services organisations in Phase 2 of its digital regulatory reporting pilot and looking at how to convert regulation into code. This can then be executed across standardised bank data. In Austria, however, the regulator requires each bank to prepare data in a standard format in a series of ‘data cubes’, allowing cost-sharing of compliance as well as standardisation of data collection, whilst enabling them to retain control over commercially sensitive data. 

Increased regulation will naturally slow down systems and processes in the short term, particularly as RegTech professionals adapt to the changes, but long term we are likely to see more efficiencies and cost savings. 

What candidate profiles are RegTech’s seeking?

Naturally, as the RegTech market evolves, so too does the candidate profile that businesses seek. Financial services professionals looking to work in RegTech must therefore become educated and prepare for the next wave of change to ensure they react effectively and efficiently. 

There has been an influx in regulatory recruiting roles within financial services, especially in highly regulated areas like brokerage and investment management. We have seen an increase in demand for Qualified Accountants with International Financial Reporting Standards (IFRS) experience with specific rules and regulations, but fairly fluid between types of financial services organisations. There is also a need for candidates who are qualified, and have done a rotation in a regulatory environment, with 2-3 years of experience. 

How can we solve this talent shortage?

Regulations are constantly changing, which means we are seeing an increase in hiring. Additionally, with increased regulations, there is an even greater need for talent. Therefore, financial services professionals with the right experience and talent, for example, Heads of Regulation or Regulatory Analysts, can command higher salaries and better packages. 

At Marks Sattin, we help match the highest quality candidates to the right roles. We have a proven track record spanning over 30 years working on a contract, interim and permanent basis, providing a service that is perfectly tailored to individual and specific needs. If you’re looking for your next job in RegTech, find out more about compliance jobs or browse our technology jobs today.

05/12/22
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