Demand for financial services falls for first time in five years as regulation becomes key factor with concerns over compliance.
Total business volumes in the financial services sector fell slightly in the three months to December, marking the first contraction of demand since September 2013, according to the latest CBI/PwC Financial Services Survey. The top three challenges for the year ahead include regulatory compliance, cited as an important challenge by many firms (26.7 per cent of maximum score).
Although growth in compliance spending continues to moderate, the regulatory environment is seen as the most important constraint on business expansion in the year ahead. Banks, insurance brokers and finance houses were most dissatisfied when asked whether regulators are keeping pace with digital innovations (such as digital documents, on-line platforms or apps) that could help support regulatory implementation and compliance. Common data standards/formats are seen as the most important digital innovation regulators could adopt in the next 18-24 months to help reduce the costs of regulatory implementation and compliance.
In assessing satisfaction with digital innovation by regulators, 25 per cent of firms said they were satisfied that regulators are keeping pace with digital innovations that could help support regulatory implementation and compliance. This compares with 28 per cent saying they were dissatisfied. Almost half (47 per cent) of those expressing an opinion said they were neither satisfied nor dissatisfied with regulators’ digital innovations. The most important digital innovations for regulators highlighted by firms were developing common data standards/formats (72 per cent). Firms said it is ‘essential’ or a ‘high priority’ for regulators in the next 18-24 months to help reduce the costs of regulatory implementation and compliance. Firms believe the most significant potential constraints on business growth over the coming year are statutory legislation and regulation (49 per cent), level of demand (41 per cent) and competition (39 per cent).