Although there are encouraging signs of adoption, full integration is still some way off, according to a survey conducted by The Lab, an initiative of the Cambridge Centre for Alternative Finance at the Cambridge Judge Business School, University of Cambridge. This is because the majority of businesses are still developing their digital infrastructures, which will ultimately determine how well suptech performs.

64 financial authorities from six continents, including central banks, securities and capital market regulators, financial conduct regulators, and insurance supervisors, participated in a survey that provided financial sector oversight for a sizable population of about two billion people. The Lab performed the poll from August to November of 2023, and the results are included in the yearly State of SupTech Report.

What is being incorporated

A vibrant ecosystem is rapidly materializing, as shown by the 81 percent of enterprises that have indicated a suptech strategy, up 10 percent from the previous year. Financial authorities are also determining which technologies are most frequently used.

Supervisory processes continue to benefit from the use of descriptive analytics (83%), dashboards, on-premise relational databases, web portals (79%), and static reports (73.6%) to improve data quality, management, and overall efficiency. Though 7.6% of respondents said they had used generative AI into their suptech solution, financial authorities are starting to investigate next-generation technologies.

"The most impactful change we can make in financial services today is to accelerate the digital transformation of supervisory agencies worldwide," stated Simone di Castri, co-head of the Cambridge SupTech Lab.

Financial authorities can better handle the issues posed by globalization, datafication, digitalization, and business model diversity with the use of advanced suptech solutions. They can use it to address urgent problems like financial crime, fraud, marginalization, enabling climate change, consumer protection, and biases in artificial intelligence. Our survey's findings show that financial regulators are starting to recognize the enormous potential of suptech.
 

How is suptech of use?

Prudent banking (69%) and consumer protection and market conduct (62%), are the main topics of application cases for suptech. Cyber risk monitoring (39.3%) and anti-money laundering/counter-terrorism funding and proliferation (AML/CFT/CPF) (59%) come next. Remarkably, only 21% of responding agencies reportedly prioritize digital assets and cryptocurrency supervision, while only 15% prioritize ESG.

Commitments to gender inclusion are also increasing. Currently, 45 percent of financial authorities are gathering data that is broken down by sex. Ninety-seven percent of respondents utilize the data to help set particular financial inclusion goals and targets as well as to support the creation of national financial inclusion policies. Moreover, 79% of respondents use data that is broken down by sex to find gaps in the availability, application, and caliber of financial services.

Financial authorities ought to collect data on more than just demographics in order to obtain more detailed understanding of the issues that are unique to each gender.

Determining effects

Alongside the digital change, there is a cultural shift occurring as financial authorities develop new roles to promote the adoption of suptech, train personnel, and work together throughout the supervisory ecosystem.

According to 76 percent of financial authorities surveyed, the ability to react quickly to emerging hazards and take supervisory action is the main effect of their suptech adoption. Additionally, 65% of them mention more effective information flows between supervisors and customers. Better and more transparent data analysis and prompt resolution of possible problems are made possible by this.

Additionally, 52% of suptech projects have a favorable effect on consumer outcomes. As a result, the financial markets are now more protected and have more confidence.
 

Data flow-dictating structures and strategies

"Through the Lab, we endeavour to serve as a catalyst for the responsible integration of technologies, empowering public sector authorities to manage more effectively and efficiently some of the most pressing economic risks we face as a society," stated Matt Grasser, principal technologist and co-head of the Cambridge SupTech Lab.

"The State of SupTech Report's diverse perspectives from the global supervisory community serve as a guiding force in shaping our training programs, digital tools, and research." The research for this year delves especially thoroughly into the policies and procedures that control data flows in financial authorities, which inevitably affects how suptech solutions may be customized and integrated with current supervisory procedures.

The next generation of underlying digital supervisory infrastructure for data collection, validation, and storage needs to be carefully accelerated. This subtlety is also essential for reaping the benefits of suptech solutions that make use of cutting-edge methods like machine learning, natural language processing, and even the newly emerging family of technologies known as generative AI.