2024 has been a year of change for financial services regulation, and in turn, for regulatory technology (RegTech). The Financial Conduct Authority (FCA) launched the Consumer Duty initiative, setting new standards for consumer-centric practices in financial services. Simultaneously, the European Banking Authority (EBA) advanced the Digital Operational Resilience Act (DORA), reinforcing requirements for digital operational continuity and risk management. Meanwhile, discussions surrounding cybersecurity and data privacy remained prominent. This article explores the regulatory changes and developments seen throughout the year, and the role that RegTech plays.

Consumer Duty

The FCA’s Consumer Duty initiative aims to ensure that financial institutions prioritise good customer outcomes by introducing clear and measurable obligations. The directive requires firms to rethink product design, communication strategies and customer support frameworks. To meet these demands effectively, RegTech plays a crucial role by automating compliance activities, setting timely reminders for tasks and providing a comprehensive data landscape. This allows firms to shift their focus towards their customers and make informed, data-driven decisions. In doing so, the initiative reflects a broader trend of building trust in financial markets through greater transparency and accountability.

DORA

The EBA’s updates on the Digital Operational Resilience Act underscored the growing importance of maintaining operational continuity in a digital-first world. This urgency was highlighted by the CrowdStrike incident in July, which disrupted 8.5 million devices globally due to a faulty software update, exposing vulnerabilities in cybersecurity systems and cloud ecosystems. In response, financial institutions have increasingly turned to RegTech solutions that provide real-time monitoring, store incident response documents and offer easily accessible policy resources. By emphasising the need to test operational resilience against cyber threats, DORA has further fuelled the demand for advanced RegTech tools.

Crypto Regulations and MiCA

The European Union (EU) Markets in Crypto-Assets (MiCA) regulation gained momentum this year, aiming to establish a comprehensive framework for the cryptocurrency sector. MiCA introduces critical requirements for transparency, risk management and consumer protection, addressing long-standing regulatory gaps in digital asset markets. Meeting these requirements can be complex, but RegTech plays a pivotal role in simplifying and enhancing compliance processes. By enabling demonstrable and transparent compliance activities, RegTech supports firms in adhering to MiCA’s provisions while providing a comprehensive risk management framework. Beyond compliance, RegTech also allows firms to proactively identify and mitigate emerging risks, helping to build trust and stability in the rapidly evolving cryptocurrency ecosystem. As the crypto sector matures, RegTech solutions will be instrumental in ensuring firms remain agile and responsive to regulatory demands.

SMCR and Rachel Reeves’ Speech

Rachel Reeves’ Mansion House Speech in November 2024 placed significant emphasis on reviewing the role of the FCA and the Prudential Regulation Authority (PRA) as regulators. Firstly, The Senior Managers and Certification Regime (SMCR) came under scrutiny for being “overly costly and administratively burdensome”, with the FCA and PRA committing to consult on its removal in its entirety. Secondly, the PRA intends to consult on reducing the length of pay deferrals, with the aim of bringing the UK in-line with other countries. Thirdly, the FCA Handbook is under review for its duplicative regulatory requirements, aiming to make regulated activities simpler for financial institutions to understand and adhere to. Finally, the Chancellor announced the FCA will consult on making changes to financial advice and guidance – a sector which is currently inadequate, according to Reeves.

The Chancellor’s speech underlined the UK government’s intentions to strike a balance between robust regulation and encouraging growth within financial services. For RegTech providers, the challenge lies in being ready react and adapt to evolving regulations. Simplifying the Handbook and changes to SMCR could lead to less complex reporting and monitoring obligations, while also increasing the demand for innovative RegTech solutions capable of adapting to the dynamic regulatory environment.

2024’s developments in the regulatory environment, and impact on RegTech, underscore the ever-changing nature of financial services compliance, driven by technological innovation. As the industry prepares for the year ahead, focus areas will include DORA compliance on 17^th January 2025, refining AI practices and addressing challenges in cryptocurrency. By leveraging advanced technologies, the RegTech sector is well-positioned to navigate the complexities of modern compliance.

To discover how Axiol enhances compliance processes and risk management, book a demo with one of our experts today. Visit our website or contact us at info@axiol.com for more information on how we can help you achieve seamless, efficient regulatory compliance.