Regulation in the finance industry continues to grow, and the introduction of MiFID II will see this even more so. With this in mind, even more financial institutions are now turning to software capabilities to support their regulatory needs.
Another event which has cemented the need for additional processes to be put in place is the recent leak of the Panama Papers, which put the financial services industry in the spotlight. This highlighted the need for companies to hold and retrieve accurate data, something that is increasingly being supported by emerging software.
According to the Financial Times, experts predict that banks will now, more than ever, turn to external technology providers to help them comply with a mounting regulatory burden.
Other regulatory changes that the industry will see in the coming years include anti-money laundering rules and ringfencing, which requires banking groups to separate their retail arms from riskier divisions by 2019.
Cliff Moyce, global head of finance practice at technology consultancy DataArt, stated: "There are huge regulatory costs and overheads, which are something of an issue for banks. Banks are using screening software, plugging in extra IT tools to core systems to pick up any activity that might not be compliant."
Estimates from consultants KPMG show that, in the UK, more than 80 per cent of banks’ technology budgets for the past five years have been spent on addressing regulatory requirements, mitigating litigation and streamlining.
To date, any software being used by these financial institutions tends to focus on just one area of regulation, but increasingly sophisticated programmes are being developed in the hope that these processes can be streamlined.
With this in mind, technology vendors are now writing artificial intelligence programs that aim to create a single compliance software.
Bruce Laing, partner at consultancy Deloitte, said: "There are lots of regulations in many different jurisdictions, but a lot of the technology only focuses on one problem. Banks don’t want to have ten different sets of regulation technology."
Scott Weber, managing director of cyber-risk specialist Stroz Friedberg, said that one area that is currently being focused upon is communication, and how technology can analyse conversations to highlight anomalous words or patterns, which could potentially reduce the amount of human intervention that is necessary.
In addition, businesses are staying up-to-date with ongoing regulatory requirements in order to ensure that technology is becoming available as quickly as possible to support growing regulatory requirements.