Regtech market the ‘sleeping giant of the financial services world’ – FCA

The FCA has revealed it is looking at ways to better support RegTech solutions through the creation of a ‘digital sandbox'.

In a speech delivered at the Chief Data Officer Exchange Financial Services conference in London, FCA director of innovation, Nick Cook, suggested the Regtech market has been a key ‘underserviced’ area of the Sandbox – and an area the FCA wants to improve in terms of the needs of firms.

Cook highlighted that the RegTech market is growing – with investments more than doubling between 2017 and 2018, from approximately £1.44bn to in excess of £3.45bn – although he still considered it to be the sleeping giant of the financial services world.

“The reasons for this untapped potential are undoubtedly manifold and several beyond our gift to remedy, for example the length of sales cycles and complexity of information technology systems in many of the larger institutions who are potentially significant consumers of RegTech,” Cook said.

“However, there is perhaps one key area that we may be equipped to address.

“We know from our discussions with RegTech firms, and through the TechSprints we have run, that a key struggle for RegTech solutions is making the step from Proof of Concept to Proof of Value – being able to demonstrate to these potential customers in the financial services industry that your solution not only works, but may provide a more efficient and effective way of doing things than they are currently done.

“In other words, to develop trust in your solution and develop the business case for deployment and implementation – to justify the security, procurement risk and cost requirements that these involve.”

The speech also pinpointed the FCA’s communication from RegTech firms that missing from the market is a lack of access to high-quality synthetic data assets against which to test new technology solutions.

Cook indicated that the FCA was currently looking at beginning conversations around what the digital testing environment might look like, what role it could play in supporting its creation, and whether it could be something that could be scaled across jurisdictions.

Cook continued: “We already have a bit of experience on this front in terms of the way we run TechSprints, essentially creating an ephemeral ‘digital sandbox’ where very focused proofs of concepts can be tested and then demonstrated to industry for a very finite period of time, with the environment itself usually only being in existence for a week or so.

“We have received great engagement from RegTech firms at the TechSprints we have held in recent years, so feel that exploring a permanent, data-rich testing environment is something really worth pursuing.”

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