Backlash from compliance failures is now something to be feared. Following the financial crisis, a total of $321 billion in fines have been levied worldwide, with some financial institutions, such as the Bank of America, hit with individual bills of over $10 billion. In response, businesses operating within the financial sector are investing huge amounts of resources into regulation compliance:
- Major banks now spend upwards of $1 billion annually on client compliance checks
- Institutions across Asia invest $1.5 billion on anti-money laundering practices alone
- 15% of staff time and resources are dedicated to risk management and compliance
Adrian Black, CEO of RegTech firm Northrow, credits RegTech’s success to better automation and more advanced software:
“In recent years, increased automation, as well as improvements in the range and quality of solutions, has allowed RegTech to offer real value in terms of time and cost savings. The increased adoption of open API-based technology, married to ongoing regulation changes, has meant that RegTech firms have become important players in the financial sector. They offer the capacity to ease the regulatory burden on banks and other institutions by improving operational efficiencies, while also ensuring security and compliance standards are upheld.”
With $80 billion spent annually on risk assessment and compliance, RegTech already has the potential to outstrip FinTech investment by more than 150%. This is set only to increase, with spending estimated to rise to $120 billion within four years.
“RegTech allows for a continued focus on improving and streamlining the client onboarding process, without a lack of attention on other elements risking compliance,” the Northrow CEO continues. “Moving forward, we predict a major rise in the popularity of automation through RegTech, particularly in response to increased regulatory scrutiny.”