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STAYING AHEAD OF THE CURVE
Evolving expectations on digital fundraising and investments have put pressure on capital market participants to improve their customer experience to remain relevant. With more consumers demanding tailored and personalised digital experience, a deeper understanding of individual clients and the ability to offer bespoke products to meet investor needs is required. For market participants to be able to achieve this at scale, they need to incorporate advanced technologies and data analytics effectively into their businesses and operations.
New solutions have also emerged to enable a more efficient and effective approach towards managing risks, client onboarding as well as regulatory reporting, compliance and monitoring. These new solutions, collectively referred to as RegTech, are gaining momentum globally. Since 2017, global investments into RegTech have grown by ~7.0 times to $10.6 billion in 202016. Various surveys have also shown growing interest from regional and global financial institutions to adopt RegTech moving forward17,18. Most RegTech efforts by financial intermediaries can be seen in areas such as KYC, transaction monitoring, AML screening, fraud prevention, compliance risk analysis and regulatory reporting. Regulators across jurisdictions have also begun to play a bigger role in building greater awareness and promoting the growth of RegTech within their markets.
As data analytics gain traction among market participants, governance issues relating to the collection and usage of data have come to the forefront. Global regulators have begun setting standards on data protection and privacy to clarify and establish the rights of consumers over their personal data as well as the role of businesses in safeguarding the data of their consumers. The European General Data Protection Regulation (GDPR), for example, is a step in this direction. It provides consumers with greater control over their personal data, allowing them to extract it from an entity for their own use or to share it with another entity, or alternatively, request for erasure of their data.
Beyond the existing applications of technology in the capital market (‘known knowns’), there is also a need to consider existing technologies that have potentially new applications (‘known unknowns’), and technologies that have yet to be invented (‘unknown unknowns’). As a result, globally, securities regulators routinely review regulations and policies with respect to technology risk management. Over the years, regulatory policies and guidance have evolved from covering traditional areas of technology risk management, such as technology governance, technology risk oversight and operational resilience, to newer developments on data privacy and security, responsible AI as well as cloud computing. In this respect, the SC will continue to take a multi-pronged approach to manage emerging technology risks by improving awareness of new technologies, understanding their applications and the potential risks to the capital market as well as designing appropriate regulatory policies.
Globally, securities regulators are advancing the use of data to inform regulatory policymaking and actions. In addition to the automation of regulatory reporting and processes as well as data collection for intelligence purposes, regulators are transforming their organisations, developing new capabilities, recruiting new talent and enhancing the way intelligence is used to take swifter regulatory actions. These efforts will pave the way for regulators to gain deeper insights into markets and investors as well as be more agile when responding to emerging risks and potential harm to investors, while being more efficient in the use of resources.
Pulse of Fintech H2’20, KPMG, February 2021.
Transforming Risk Management and Compliance: Harnessing the Power of RegTech, Hong Kong Monetary Authority, 2020. Fintech, RegTech and The Role of Compliance, Thomson Reuters, 2021.
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