A recent blogpost by PassFort has summarised what is driving the increased adoption of RegTech solutions and what trends the industry may see in 2022.
While the world continued to face significant challenges due to the Covid-19 pandemic, the RegTech sector benefitted from the move online as many companies began having to transition to digital in their compliance and onboarding processes instead of through traditional, paper-based means. This boon for RegTech was detailed in research that predicted the industry would be valued at $15.8bn by 2026.
PassFort noted this move online and to hybrid and home working models became the norm, rather than the exception and that this put increased pressure on security systems, compliance and personal responsibility.
What is driving the rise of RegTech? PassFort said, ?The rise of RegTech is down, in part, to increased instances of fraud, to the ongoing battle with money laundering, to the increased adoption of digital financial services by consumers, and also the change in people working from home. All of which creates compliance complexities that the financial services industry needs a digital solution to. Enter RegTech.p>
A key trend across the financial sector in general has been the rise of cryptocurrency. Earlier this year, the Financial Conduct Authority added crypto firms to the list of businesses that are required to submit a financial crime report with the rules applying to cryptocurrency exchanges and custodial wallet providers. With this in mind, PassFort detailed that it believed changes to regulation in crypto is going to be a big theme for 2022, as the EU central bank also begins to develop its digital currency.
The FCA and the Prudential Regulation Authority also published their final policy and supervisory statements on operational resilience in March of this year. By March 31 2022, companies must be required to identify any important business services, determined maximum tolerable disruption and undertaken the necessary mapping and testing.
Data sharing was also strengthened in 2021. In November, the European Parliament and the Council of the EU came to an agreement of the proposed EU Data Governance Act.
PassFort noted the act is intended to boost the availability of data by increasing trust in data intermediaries and strengthening data sharing across the EU as well as between sectors.p>
Going into 2022, PassFort detailed in its blogpost to watch this space for the next instalment of data protection regulations and how they change financial services.
The firm said, ?Where once financial institutions would review customers at onboarding and then at intervals according to their risk rating, it become evermore necessary to perform KYC on an ongoing basis and keep customer risk profiles updated regularly. AKA – the focus is on perpetual KYC.
?As the regulatory landscape becomes more rigid (and more complex), it is important for financial institutions to use real-world and real-time data to inform customer profiles on an ongoing basis, while still providing a seamless compliance experience.p>
PassFort also remarked that enhancement to AI-driven KYC seems inevitable in 2022.
The company cited a report by Forrester that stated banks will double down on innovation next year, with banks expected to continue their frenzy of deal-making, investing in, or acquiring FinTechs.
The report also stated it expects financial services organisations to embrace ESG products and services in 2022, such as green loans, mortgages and checking accounts with sustainability and carbon-tracking features.
However, PassFort underlined that the biggest battle than will face FinTech and RegTech in 2022 is the war for talent. This, the company claims, has arisen with the creation of new regulation, digital transformation, increasing fraud and changing customer demands with more specialised job roles emerging because of this.
Read the full blogpost here.
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