Communication and compliance: how regtechs can stand out in a growing market
By Arthur Instone, Financial Services
Regulatory technology – or ‘regtech’ – is one of the fastest growing areas of fintech. The global size of the regtech market is projected to increase from $9 billion in 2022 to $70 billion by 2032, with annual spending on regtech solutions expected to reach £200 billion by 2028. KPMG has highlighted regtech as a “particularly hot sector”, driven by impending regulatory changes which are set to make 2024 one of the most significant regulatory years in recent history.
The regtech movement is well and truly underway, promising to disrupt the regulatory landscape through innovative solutions to the ever-increasing demands of compliance.
As the value of regtech crystallises around the globe, now is the time to assess the forces driving sector growth and how a carefully thought-out compliance PR strategy can help regtechs communicate their value in an increasingly saturated market.
Innovation spurred by regulatory change
For those of us that follow the world of financial services regulation, we know that things don’t exactly move at lightning speed.
However, 2024 is set to hold a uniquely busy regulatory calendar. The next 12-18 months will be a period of sea change, with several landmark regulations coming into effect across a range of different financial sectors. These include:
Banking – In 2024 banks will need to step up their preparations for the remaining Basel reforms, with implementation set for January 2025 and July 2025 in the EU and UK respectively. UK banks also have until May 2024 to implement the Prudential Regulation Authority’s principles for model risk management.
Insurance – In addition to the phased implementation of Solvency UK which fully takes effect from December 31 2024, insurers will also need to navigate the final policy decisions on the global Insurance Capital Standard (ICS) before it kicks in as a Prescribed Capital Standard (PCS) from 2025.
Regulatory reporting – There are changes to global regulatory reporting regimes this year, including modifications to version 3.2 of the CFTC Rewrite and final implementation of EMIR Refit in April 2024.
Payments – By 7 October 2024, payment service providers must comply with the Payment System Regulator’s (PSR) new mandatory reimbursement requirements for APP fraud and scams, meaning firms will be against the clock to meet the deadline.
Operational Resilience – There is now just under a year left until the EU’s Digital Operational Resilience Act (DORA) comes into effect. From January 2025, firms must follow new rules for the protection, recovery and repair of ICT-related incidents.
Collectively, these changes have pushed regulatory compliance to the top of the agenda. According to Grant Thornton, 65% of regulated firms anticipate more regulatory obligations in 2024. With institutions under pressure to meet fast-approaching deadlines, the appetite for regtech solutions is growing.
It’s estimated that regtech will account for over 50% of global compliance budgets by 2026, whilst a 2023 survey by Finastra found that the need to align more closely with compliance needs was the third biggest motivator amongst banks to integrate third-party tech solutions.
Communication is king
Regtech is set to play a central role in compliance strategies over the year ahead, but the sector still needs to overcome several challenges: none more so than communication.
One of the key challenges that regtechs face is getting their voices and value heard. The 2021 Global City RegTech report found that a huge 67% of financial institutions cite lack of awareness regarding the available solutions as the biggest barrier to regtech adoption. The same Grant Thornton report found that 13% of regtechs cite promotion and marketing as the single most important factor that would help them expand internationally.
In an increasingly crowded market, how can regtechs cut through the noise to communicate their offering when selling into the regulatory space?
- Demonstrate value and differentiation – Sector growth means greater competition as more players seek to get a piece of the action, meaning the challenge lies in ensuring a unique value proposition. For many regulated firms, regulation has become increasingly complicated in the aftermath of the global financial crisis, as regulatory frameworks aimed at spreading risk have at times made the task of compliance more complex. Regtechs looking to get their voices heard should home in on these specific pain-points, putting themselves in the shoes of their customers and focusing on how technology can help.
- Be direct and simple – Regulation can be complicated to say the least. The sector is saturated with compliance-specific jargon and terminology which can be difficult to understand, with regulated entities often suffering from ambiguous and overlapping rules. This is why it’s so important that regtechs keep things simple when it comes to how they communicate; their customers are navigating regulatory mazes that are themselves a huge operational burden. We often see phrases like “improved efficiency” and “streamlined process”, but what do these actually mean? Regtechs should use their marketing and communication channels to clearly highlight the tangible benefits of their solution, such as cost and time-savings.
- Engage in public debate – The good thing about the jam-packed regulatory calendar over the next 12-18 months is that there is a lot to talk about! As new regulations come into effect, and existing ones are updated, regtechs should get involved in the discussion. Are firms sufficiently prepared for EMIR Refit? How does DORA compare to the UK’s approach to operational resilience? Are the PSR’s new reimbursement requirements enough to tackle the fraud epidemic? Regtechs should build meaningful campaigns around the industry’s top regulatory issues, and most importantly, have an opinion on them.
Aspectus has been building regtech reputations for over a decade. Our regtech PR team has the perfect blend of regulatory, financial services and capital markets expertise, with a laser sharp focus on making sure we’re one step ahead of the regulatory news cycle. We know which regulations are on the horizon, what they mean for regulated entities and have long-standing relationships with journalists who trust us to collaboratively work with them in shaping their stories.
The demand for regtech solutions will grow significantly throughout 2024 and beyond. As regulation and technology become more closely integrated, it is vital that regtechs are on the front foot when it comes to building brand trust and credibility. To find out more how Aspectus can support you on this journey, get in touch here.
