REGULATION TECHNOLOGY Acceleration in
The world around us is changing; many of
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you reading this article, like plenty of other businesses, including regulators, banks and government services, may have been pressed into speeding up the digitisation of your company. Remote working has perhaps permanently changed the way organisations operate, and this in turn has inevitably opened up many challenges such as cyber risk. Indeed, according to a McKinsey Global Survey of executives, the response to Covid-19 has accelerated the adoption of digital technologies by several years across various industries. Given the growing influence of technology,
there is a lot of potential for regulation technology (RegTech), particularly in automation. For instance, the use of robotic process automation (RPA) and natural language processing (NLP) will see artificial intelligence (AI) ‘learning’ better equipped to tackle fraud detection. At the Bank of England, we have recently introduced a cognitive search engine with AI capabilities. There are, of course, voices that are cautious about the implementation of AI, particularly for processes with a critical output. These voices point to the pressing ethical issues that challenge it, such as security and AI bias. These concerns should not inhibit innovation, but should be addressed with meticulous attention to detail. The Bank of England has found that interest among banks in adopting machine learning (ML) and data science (DS) has continued during the Covid-19 crisis. In August 2020, we conducted a survey of banks to understand the impact of the
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regulatory technology
Melvin , senior RegTech specialist at the Bank of England, looks at the move towards digital transformation
“The Bank of England has found that interest among banks in adopting machine learning and data science has continued during the Covid-19 crisis”
pandemic on their use of ML and DS. We found the following: • The use of ML and DS by banks has remained broadly stable since the start of the pandemic, with the number of applications staying the same or increasing. • Half of the banks surveyed expected an increase in the importance of ML and DS for future operations as a result of Covid-19. However, only a third of banks said there was an increase in the number of planned or existing ML or DS projects. RegTech is expected to grow rapidly.
According to Juniper Research, global RegTech spending could rise from an estimated $25bn US in 2019 to exceed a massive $127bn by 2024. In an industry where central banks play a key role, we can expect tech-driven solutions that expedite recovery, resilience and innovation to fare better than some other industries in the face of digital transformation. In April 2021, the City of London Corporation published a report entitled ‘A Critical Year for RegTech’. The report found that the annual cost of compliance for Britain’s top five banks could be cut by at least 0.05%, or a combined £523m with the greater adoption of this technology. The financial services industry could continue to benefit from RegTech, while the wider RegTech industry could play an important role in the digital economy in the UK.
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