The Growing Influence of Suptech in Financial Authorities

The recent study conducted by the Cambridge SupTech Lab has revealed a substantial uptick in the implementation of supervisory technology (suptech) within financial authorities. This represents a positive development, with a 10 per cent increase in firms advancing their suptech initiatives compared to the previous year.

The survey, carried out by the Cambridge SupTech Lab between August and November 2023, encompassed 64 financial authorities from six continents. These authorities oversee a significant population of approximately two billion individuals. The findings of the survey are detailed in the annual State of SupTech Report, demonstrating an escalating interest in the integration of suptech initiatives within the financial industry.

The survey disclosed that 81 per cent of financial authorities currently have some form of suptech initiative in place, marking a 10 per cent rise from the previous year. The most widely implemented technologies include descriptive analytics, dashboards, on-premise relational databases, web portals, and static reports. However, there is also a growing interest in next-generation technologies such as generative AI, with 7.6 per cent of respondents incorporating it into their suptech solution.

Simone di Castri, one of the heads of the Cambridge SupTech Lab, underscored the potential impact of digital transformation in supervisory agencies worldwide. According to Castri, advanced suptech solutions can aid financial authorities in managing challenges stemming from digitalization, datafication, globalisation, and the diversification of business models. These solutions can address pressing issues such as financial crime, fraud, exclusion, climate change enablers, consumer protection, and artificial intelligence biases.

Additionally, the survey shed light on various use cases for suptech, focusing on prudential banking, consumer protection, and market conduct. Intriguingly, only 21 per cent of responding authorities have identified cryptocurrency oversight as a priority, indicating varying levels of attention given to different aspects of financial oversight.

An important revelation from the survey is the increasing commitment to gender inclusion. Forty-five per cent of financial authorities are now collecting sex-disaggregated data and using it to support the design of national financial inclusion strategies, signaling a positive stride toward addressing gender-specific challenges within the financial sector.

With the growing influence of suptech, financial authorities are creating new roles to drive adoption, training staff, and collaborating across the supervisory ecosystem. The most significant impact reported by surveyed financial authorities from suptech implementation is the speed of response to emerging risks and supervisory actions. It also facilitates more efficient information flows between consumers and supervisors, leading to improved data analysis and timely response to potential issues.

Matt Grasser, the principal technologist and co-head of the Cambridge SupTech Lab, emphasized the need for responsible integration of technologies and the importance of understanding the strategies and structures that dictate data flows within financial authorities.

Overall, the findings of the survey indicate a positive trend towards the integration of suptech in the financial sector. As financial authorities continue to explore and adopt new technologies, it is essential to ensure that these initiatives are leveraged responsibly and effectively to enhance supervisory processes and outcomes for consumers.