Banks and other financial institutions have long been some of the most highly regulated businesses in the world. Yet, if it seems like the amount of regulatory actions in recent years have gone up, that’s because they have.
During fiscal year 2023, the SEC filed nearly 800 enforcement actions and collected almost $5 billion in financial remedies. The only time it has collected more than that? The previous fiscal year.
Many of the most high-profile fines stemmed from breaches of the SEC marketing rule. So-called off-channel communications also caused problems. Indeed, a host of the world’s largest banks were hit hard for not preserving all business-related records, a tall task in a world where everyone has a smartphone and given the popularity of encrypted apps like WhatsApp.
Whatever the case, the overall trend speaks to the intensity of the current federal regulatory framework. Of course, that could undergo a drastic overhaul depending on the upcoming presidential election, but firms shouldn’t bank on that. The stakes are too significant.
Against this backdrop, we asked three industry experts about the extent to which the current environment has increased demand for regtech solutions. Here is what they said.
AJ Hachim, co-head of Berkshire Global’s financial technology practice
Companies operating in the regtech space have directly benefited from the constant changes to our regulatory environment. As new regulations get signed into law and fines continue to be issued for non-compliance, financial institutions continue to invest in technologies that will keep them compliant. We expect this trend to continue, especially with the introduction of AI-powered solutions that can offer compliance teams insight into potential non-compliant matters in ways that previously were difficult to uncover.
Sid Yenamandra, founder and CEO of Surge Ventures
The intense regulatory environment has significantly boosted demand for regtech offerings. As regulations become more complex and stringent, financial institutions are increasingly turning to regtech solutions to ensure compliance, manage risk and streamline operations. These technologies offer automated monitoring, real-time reporting and data analytics, reducing the burden of manual compliance tasks and minimizing the risk of regulatory breaches. Let there be no doubt: The need for cost-effective, efficient and accurate compliance management has made regtech indispensable, driving rapid adoption and innovation in the sector.
Scott Sailors, Chief Information Security Officer, AlphaONE Operations
As regulations become more complex and stringent, financial institutions need efficient ways to ensure compliance. Regtech solutions offer automated, scalable and cost-effective tools to navigate the ever-changing regulations, reducing the burden on internal compliance teams. By leveraging advanced data analytics, machine learning and real-time monitoring, regtech solutions enhance compliance transparency and accuracy, enabling firms to quickly adapt to regulatory changes and avoid costly penalties.
Additionally, regtech fosters greater trust with regulators and clients by providing robust compliance frameworks that align with evolving standards. The surge in demand is driven by the necessity for these advanced solutions to maintain regulatory compliance efficiently. However, choosing the right vendors is crucial, as not all can deliver the same quality in understanding and adhering to compliance requirements. Regular audits and monitoring of any third-party solution are essential to ensure ongoing compliance and effectiveness.
