By Simon Cole, CEO at Automated Intelligence.


When you picture the future of finance, what do you see?

The end of bricks and mortar banking?

A cashless society?

Cryptocurrency payments?

How about data-driven regulation?

Technological advancements don’t just impact the finance industry; they have repercussions for regulators too. The future of finance is on its way, and along with it, the future of regulation. While financial services firms have been embracing digital transformation during the pandemic, they’ve accumulated more data than ever. And this means regulators have had to develop their own data driven approach.

So, what does this mean for firms? Regulators will want to see intelligent data management strategies and tools in place to manage the influx of information. Firms now hold an increasing amount of sensitive information, much of it coming under the category of unstructured data. Without proper management, businesses run the risk of leaving their datasets open to corruption and theft.

Simon Cole

The implementation of new IT infrastructure demands systems and protocols for dealing with risks. Regulators will need to see governance and risk management frameworks that minimise risk for customers, stakeholders, and the business’s reputation.

There is some good news, though. Most firms already have all the information they need to deal with the regulatory future and meet evolving standards of compliance. All they need to do is take control of their unstructured data.


Understanding the push towards data-driven operations

When fintech first arrived on the scene, the industry was encouraged to behave like the tech giants in Silicon Valley: move fast, and break things. Firms were excited about the potential of this technology, and the market rushed to implement it into their infrastructure.

In 2020, financial firms shifted to cloud native architecture in response to global lockdowns. As customers demanded more digitised services, they produced an increasing amount of data. Combined with the existing backlog of unstructured data many financial services firms are yet to deal with, the need for intelligent data management solutions has never been greater.

The pandemic changed how the financial services industry uses data. And the FCA is beginning to change the way they manage data, too.  We recently held a data and compliance summit, where our FCA panellist, Steve Green, shared how the regulatory body is investing in skills for handling granular data, so that firms no longer need to aggregate.

Many organisations struggle with the justification of data collection, and as Steve highlighted, better defined taxonomy for the data they’re collecting will illuminate some of these processes for financial firms.

It’s also worth mentioning that the FCA is dealing with significantly more firms. The rise of challenger banks and various finance start-ups means there’s an increasing need for regulation. Automation has enabled regulators to divert their existing resources to more organisations with standardised reporting.

Complex systems require updated methodologies of management. It’s no wonder Suptech – supervisory technology regulators can use to monitor market risks – is on the rise, as regulatory bodies shift their operations to reflect data driven economies. While financial firms embrace regulatory tech, regulators employ supervisory tech to ensure they capture every detail.

The problem is, when you move fast and break things, sooner or later someone needs to clean up the mess. In the aftermath of a rapid switch to fully digital operations during the pandemic, we’re likely to see regulatory and security loopholes in systems that haven’t been properly vetted.

While financial firms were focused on getting operations up and running, data management probably took a back seat. As one of our panellists highlighted at our virtual data and compliance summit – there are only two types of business; those who have been breached, and those who don’t know they’ve been breached.

It’s time for financial services firms to get a handle on their data. The majority of which, is now unstructured, and tricky to collate and analyse manually. Firms embraced technology to help them move their operations online in 2020, now it’s time to embrace the technology that can help them take control of their data.


A new environment

As we’ve already explored, new tech creates new risks. Many firms are using cloud systems for the first time, and human error is virtually unavoidable in this situation. Businesses are learning as they go along, which is fine until regulatory compliance is overlooked, and security operations are no longer fool proofed.

Firms need to employ data management strategy and systems that keep up with the new pace. It’s not enough to implement new IT infrastructure without addressing regulatory compliance at the same time. Reported cyber-security incidents increased by 50% in the beginning of 2020, as employees spent time getting comfortable with new systems, and hackers took advantage of the unexpected digital transition.

Regulators need to see that firms have systems and protocols in place that mitigate these risks. And with remote working likely to remain popular, and digital services favoured by customers, firms need a comprehensive overview of their entire data estates to protect sensitive information.

Understanding how regulations map together is critical, too. GDPR highlights the right to be forgotten but combine this with the European anti-money laundering directive, and customer transactions must be kept for five years. Which is why firms need to bring their entire unstructured data estate into one single perspective, where they can map and address regulations.

Without an overarching data management platform monitoring regulatory compliance, new IT infrastructure could be doing more harm than good. If firms want to get the most out of their new intelligent systems, they need to understand them inside out. Implementing a smart data management platform will tell them everything they need to know about the impact new IT infrastructure has on their compliance and data protection status.

If firms want to prepare for the future of regulation, they need to start with their unstructured data present.



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