As with other regulated industries in which COALITION operate in, several key global events combined with the ongoing emergence of technologies such as Artificial Intelligence (AI) continues to have an enormous impact on Financial Services. Additionally, the US Securities Exchange Commission (SEC) decision to approve a Bitcoin ETF will likely drive a further shift towards investing in digital assets alongside traditional financial instruments. As the use of digital assets grows, so has regulatory scrutiny, guidance and regulations around cryptocurrencies, initial coin offerings (ICOs), and digital asset custody are developing fast.

 

One of the most notable uses of AI is in the form of chatbots for Fintech, allowing users to interact with banking applications and online money services using regular language. Giants in the industry, including Citigroup and Blackrock, have already started or revealed plans involving advanced AI technology.

 

AI's pattern recognition capability is set to transform the insurance industry by offering customized products tailored to individuals' risks. This could result in more equitable insurance pricing and potentially lower costs. This innovation is not without its hurdles; there will be significant concerns regarding privacy, data security, and the potential for AI bias to impact fairness that will impact on regulations and compliance focus within Financial Services organizations. 

 

The ongoing race between criminals and institutions to use AI to support and defend against cyber-attacks means that cybersecurity will continue to be a key trend for the next years. Gartner forecasts that worldwide spending on security and risk management will increase by 14% compared to that spent in 2023.

 

As with cyber security, AI provides opportunities and threats regarding regulations and compliance.  The incorporation of AI in to so many aspects of the industry will require further scrutiny and evolution of regulatory frameworks and compliance approaches.  Also ensuring that the industry has access to up-to-date models, while protecting both internal and client information is what almost every organisation world-wide is trying to arrive at. There is a risk that the utilisation of less secure tools and non-robust processes could easily lead to large scale data leaks, eroding client confidence and release company IP.

 

AI also has great potential to support compliance efforts. Financial services companies, including banks and insurers, are planning to invest more in Regulatory Technology (Regtech) tools to strengthen their compliance teams. These tools, powered by AI as well as blockchain, and cloud computing, will become crucial in handling the increasing number and complexity of regulatory demands, especially those related to personal data and privacy.

 

Regulators are also paying more attention to how companies manage environmental, social, and governance (ESG) issues. In Europe, two significant rules – the Sustainable Finance Disclosure Regulation (SFDR) and the Taxonomy Regulation – are making it essential for businesses to report more about their sustainability efforts and to be transparent to prevent misleading claims about being environmentally friendly, or "greenwashing."

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COALITION assists companies in navigating the competing demands of remaining compliant whilst implementing new processes, policies and technology in order to remain competitive in a global market. Our comprehensive understanding of market trends, industry dynamics, and regulatory intricacies allows us to work with Financial Services organizations in cultivating collaborative excellence.