Using digitalisation in the financial industry to emerge stronger for the future

Although transformative technologies have been changing working styles and industry approaches for some time, COVID-19 has had a strong catalyst effect on the financial services sector and significantly increased the importance of digitalisation. In order to benefit from the ongoing digitalisation of regulatory compliance, it is key to understand how COVID-19 has reinforced certain trends that already existed pre-crisis.

COVID-19 has greatly accelerated the use of digitalisation in the financial services industry

The banking regulatory landscape is not only becoming increasingly complex and extensive, but another major trend is also bringing change: the increasing role of artificial intelligence (AI) and the digital transformation. COVID-19 has not only accelerated the need to digitalise rapidly but has made digitalisation a key factor in being able to meet the challenges of the pandemic. For compliance and risk management functions, digitalisation is becoming increasingly important.

The switch to digital solutions has been brought on not only by the need to reduce costs but also by increased working from home and flexible working arrangements. Overall market acceptance and the environment have also changed: there is widespread adoption of digital solutions in the financial industry and regulators are increasingly using it for oversight or data analysis purposes, for example. Thus, it goes without saying that reliance on digital solutions has increased significantly – this was shown in a recent report.¹

In this context, the advantages of applying digitalisation are obvious:²

• Data-driven supervision and compliance: Due to the complexity and volume of regulation, both supervision and compliance are becoming increasingly data-intensive. Only technology can handle such amounts efficiently.
  
• Improved risk management capabilities: Digitalisation can significantly help to compute and analyse big data sets, thereby stressing (un)anticipated risks and pushing quicker and more efficient regulatory assessments – including for ESG or COVID-19 risks.
• Holistic and integrated tech architecture: Ensuring the interoperability of systems is key. Integrating and interconnecting systems stimulates an innovative, creative tech environment, with reciprocal improvement effects.
• Reducing costs and improving efficiency: With the global regulatory avalanche, compliance and risk management have become increasingly complex. Digital solutions not only help you to save costs but also free up time for value-added analysis and strategic choices.
• The increasing use of software as a service (SaaS) and cloud services: Relying on external knowledge oftentimes leads to operational advantages and more specialised know-how compared to developing solutions in-house.

On a related note, the developments are self-perpetuating and drastically accelerating. It can be expected that, if there is no systematic effort at all levels to digitalise, institutions will, in the near future, not only be incompatible with clients’ systems but will also forego various benefits.

^{[1] Fintech, Regtech, and the Role of Compliance Report 2021.
[2] The Use of Supervisory and Regulatory Technology by Authorities and Regulated Institutions.}

PwC Legal’s Regulatory Radar – our response to increasing digitalisation

PwC Legal’s Regulatory Radar helps our clients to respond to the increasing digitalisation requirements and challenges. It is a web-based, cost-efficient all-round solution to take care of your regulatory foresight on various banking and financial services topics. Through its national and international network, PwC monitors all regulatory initiatives and provides a detailed overview and analysis of the latest regulatory developments in the financial markets in more than 40 jurisdictions around the globe (including the EU, Switzerland, the UK and leading jurisdictions in Asia). Our tailor-made solution replicates your specific corporate structure and focuses particularly on the following business areas:

• asset and wealth management
• banking
• hedge funds

Further rounding off the package, the application is web-based with 24-hour access, it is efficient to use and enables you to prioritise clearly. The regulations are structurally updated, and the database includes past and present initiatives. The Regulatory Radar also provides financial market participants with information on two very current topics:

• The Financial Industry COVID-19 Regulatory Radar tracks measures taken by financial market regulators globally in response to the COVID crisis.
• The Sustainable Finance Regulatory Radar highlights the latest sustainability-related trends worldwide.

Brand new Regulatory Foresight Report

In addition to the Radar, we also cover all relevant developments in the financial industry in our yearly Regulatory Foresight Report. The Strategic Regulatory Foresight Banking Report highlights various key regulatory initiatives in Europe, Switzerland and globally. It gives you an easy-to-read but fundamental overview of the upcoming regulations in Europe and Switzerland and distils the main regulatory themes concerning the financial industry for the next few years.

This year’s edition is all about COVID-19 and its impact on the financial industry. We want to provide some guidance amid the uncertainty and focus on questions such as:

• How has COVID-19 changed the regulatory landscape in the financial sector?
• What impact has it had on existing regulatory initiatives in Switzerland?
• What can the financial industry expect from regulators in the future in response to the pandemic?

At the same time, the report also deals with additional key topics such as digital technology, anti-money laundering and sustainable finance. Even though sustainable finance has been somewhat overshadowed by COVID-19, its importance is unchanged. Therefore, we zoom in on these topics:

• The Green Deal and recovery from COVID-19
• Sustainable finance developments in Switzerland
• New sustainable finance initiatives at EU level

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