Risk and compliance has emerged to be the area of biggest focus in banking and financial services in the last decade, as the key focus of almost all regulatory and political authorities since the crisis of 2008 has focused on mitigating risks to ensure safety and stability of financial markets.

An onslaught of new regulations at global, regional, and local levels, and the rapid pace of their evolution have increased complexities of compliance operations manifold. The situation is further compounded by limited technology capabilities to deal with of regulatory changes, and the need to analyze growing volumes of data, most notably unstructured data. The result is exploding compliance costs across the board — not only for running regular operations, but also from heavy fines due to inadequate controls (and the ensuing reputational damage).

Compliance technology is a wide-ranging theme encompassing technology solutions applied in risk and compliance operations of financial institutions. In this report, we focus on technology solutions dealing with operational risk related issues, such as KYC, AML, surveillance, and regulatory reporting. We discuss four themes that have the potential to solve many of the challenges in compliance.

  • Artificial intelligence and robotic process automation can automate manual processes and enable advanced analytics needed in KYC, surveillance and fraud operations, and we are seeing growing adoption of them.
  • We see unprecedented levels of cooperation among banks to mutualize noncore activities, with many firms engaged in developing and using compliance and reporting solutions on a mutualized basis.
  • Cloud can be an enabler of both of the above, by offering flexibility and agility in infrastructure. The industry’s attitude toward cloud adoption is changing drastically.

– Whenever there is a need to develop new solutions, we see cloud becoming the preferred choice. As banks are having to build new capabilities owing to upcoming regulations, we think the outlook is bright for cloud adoption.

• Distributed ledger technology promises to be a force of disruption in financial services. We are seeing use cases being developed in compliance, most notably in identity management and KYC.

An interesting combination of startup “RegTech” firms and incumbent providers is reshaping the compliance provider landscape, as banks increasingly look to partner rather than invest in in-house technology innovation. In this report, we discuss in detail 11 vendor solutions and their specific use cases, with a good mix of start- ups and incumbents, as well as solutions that fall under the themes we have identified.