2016 is set to be another milestone year in financial services. New challengers in and beyond the sector are launching disruptive innovations that are threating the traditional players in the market in areas like payments and loans.  At the same time, a number of regulatory changes are also set to challenge organisations as they work to ensure the access to data and reports required to remain compliant.

While the Markets in Financial Instruments Directive (MiFID) framework will come into force in July 2016, the ongoing impact of Basel III, the EU Banking structural reforms and European Markets infrastructure regulation will have an impact on financial services organisations across the continent. In addition, the Bank of England’s focus on stress tests to assess the funds being held by UK banks and ensure that they will not need to be bailed out again in future times of uncertainty continue to pile pressure on financial institutions. Add to this the requirement that all banks must be able to access data around each transaction and the activities around it in order to drive down fraud in the industry, and it makes for a complicated picture for all involved. It could be likened to trying to skateboard whilst trying to juggle… with flaming batons!

What is crucial is that all institutions ensure that they have the tools in place to analyse their business, the data they hold and the ability to report to the various institutions calling on them to deliver evidence that they are meeting new industry standards. While the context within the industry is that of greater pressure to conform to industry regulations, the market context is one in which consumers are demanding new services and more innovative delivery of these services, creating a further technological challenge. This challenge is made more difficult as businesses increasingly have to deal with increasing amounts of data from varying sources, in various forms and with varying degrees of complexity, whilst regulators are pushing for more granular data. This context is creating a complicated picture for any business looking to get ahead, while keeping in line.

Organisations are working to deliver on both fronts. However, the difficulty for many is in actually understanding whether they are compliant with the multitude of regulations coming into play in a relatively short space of time. Many of these businesses depend on highly complex, monolithic systems to handle data. This makes them difficult to manage effectively and slow to respond to new developments in technology.

The good news is that there are organisations being set up to support financial services firms as they make this transition and pool resources to help to tackle what is set to be an industry-wide challenge. For example, the Boole Business Labs from the University College Cork (UCC) recently launched as Europe’s first industry-led research centre, with a specific focus on regulated industries, including financial services. This institution has been launched with support from the Irish Government, international businesses, technology vendors and regulators. Crucially, this type of centre can help to ensure that, when rolling out new technologies and IT infrastructure in a bid to drive innovation, financial services organisations remain compliant and have visibility of any gaps, along with support in tackling any problem areas. Covering areas including cybersecurity, risk analysis and business system integrity, these institutions could hold a central role moving forward as financial services firms work to ensure that they don’t miss a beat and suffer potentially significant compliance fines.

In today’s digital world, keeping pace with technological advancements and compliance standards poses serious challenges for highly regulated industries such as financial services and insurance. Financial services institutions must make a concerted effort to understand how their business is responding to regulation and recognise any gaps quickly.