The Evolution of RegTech: Highlights from the London RegTech Forum

Corinne Jones -

Panel:

  • Diana Paredes, CEO of Suade
  • Adriana Ennab, Director of Public Policy at Credit Suisse
  • Charlotte Hall, Senior Legal Director at Onfido
  • Sian Lewin, Co-Founder of Regtech Associates

Moderator:

  • Kerstin Mathias, Director of Policy and Innovation at City of London Corporation

The iconic Guildhall's Old Library recently hosted our esteemed annual RegTech Forum, in partnership with the City of London Corporation. This prestigious gathering convened a select panel of experts from leading banks, building societies, the tech industry, and regulatory authorities. The forum's objective was to illuminate recent transformations in the finance and banking sectors. A central theme of our discussion was the Evolution of RegTech.Alderman William Russell from the City of London Corporation also gave an impactful keynote speech on the subject. 

RegTech & FinTech: Shaping the UK's Financial Future 

Alderman William Russell of the City of London Corporation delivered a compelling keynote address, discussing the pivotal role of RegTech and FinTech in shaping the future of the UK's financial and professional services sector. He highlighted that the UK stands as a global beacon in the fintech realm, leading in innovation, competitiveness, and expansion. Contributing £6.6 billion to the UK's economy, our fintech sector is unparalleled. The UK boasts unparalleled talent, access to capital, and a globally-integrated financial services sector, all underpinned by a progressive vision. 2021 marked an unprecedented surge in fintech investment, with a staggering $11.6 billion – a 217% leap from 2020. Notably, one in five of Europe's fintech unicorns call London home. This synergy between London's global financial prominence and the burgeoning fintech sector heralds unparalleled opportunities to elevate our competitive edge and success. 

Russell emphasized that while some might categorize RegTech as a fintech subset, its distinct identity is undeniable. We've all witnessed firsthand the transformative power of trends like remote work and digitalization on our business operations. The escalating demand for groundbreaking solutions promises enhanced efficiency, streamlined processes, and substantial cost savings. The post-global financial crisis era has seen the RegTech sector flourish, driven by both regulatory shifts and tech breakthroughs like cloud computing and data analytics. We cherish RegTech's potential to alleviate regulatory challenges, facilitate adaptation to regulatory shifts, and make compliance more efficient and affordable for UK businesses. The meteoric rise of firms like Suade underscores RegTech's pivotal juncture. It's poised to be a strategic catalyst for innovation, growth, and the competitiveness of the UK's financial and professional services sector. 

To stay ahead, nurturing this positive trajectory is imperative. Russell underscored that such evolution thrives on collaboration, underscoring the significance of gatherings like today's, which unite the diverse stakeholders of the RegTech landscape, including tech innovators, government officials, regulators, and other key entities. 

 

The Evolution of RegTech: Trends and Future Outlook 

Following the keynote, the inaugural session titled "The Evolution of RegTech" delved deeper into the current trends in RegTech adoption. The discussion revolved around the challenges faced by regulators and financial institutions and the prospective influence of RegTech in reshaping compliance. Several panellists concurred that RegTech is now essential in enhancing the competitiveness of the UK's financial sector. Given the growing intricacy of regulations, coupled with emerging requirements like ESG, technology has become crucial in maintaining efficiency and adherence, tackling both old and new challenges. The potential of technology in mitigating crises was underscored, emphasizing its efficacy in data analysis.  

A few years ago, the significance of RegTech was relatively subdued, with some major regulators still unfamiliar with concepts like blockchain. However, the landscape has transformed. Regulatory bodies now universally incorporate fintech teams, a testament to the UK's progressive stance as the world's second-largest RegTech market. While the sector has matured, leading to fewer emerging startups due to investment challenges, there remains untapped potential in technology adoption. The emphasis now is on demonstrating the tangible benefits of technology in enhancing compliance, accuracy, and efficiency. Financial crime emerged as a promising domain to gauge RegTech's impact.   

The sector, however, isn't without its challenges, such as KYC regulations, cross-jurisdictional compliance, and integration issues. An industry expert underscored the importance of aligning compliance with genuine customer benefits. The ubiquitous presence of AI was acknowledged, highlighting a knowledge gap that often translates into apprehension. There's a pressing need for upskilling professionals to bridge this gap and for regulators to encourage the phasing out of outdated systems. Potential solutions include incentivizing tech adoption through tax benefits and introducing certification systems for RegTech.  

From a regulatory perspective, while the AI act poses challenges, especially for high-risk companies, the UK's flexible approach is commendable. A panellist suggested introducing standards that are prescriptive but not obligatory. The call for agile regulation, complemented by feedback mechanisms, was loud and clear. In the post-COVID era, there's renewed vigour for bold initiatives, emphasizing the importance of collaborative efforts between the public and private sectors. The overarching sentiment was the need for patience in the face of change, recognizing the pivotal role of visionary individuals driving innovation. The journey of transformation demands time, energy, and conviction, but it's a journey worth embarking upon, for change is the only true constant.