When it comes to business, one thing that is consistent across all industry and verticals, is unpredictability. And when we talk about the banking and finance industry, the need for digitization has quickly accelerated after the pandemic.  

However, the extensive digitalization has even invited a range of challenges for BFSI brands that need to keep up with productivity without inculcating any operational complexities. This even includes addressing all the environmental and social issues to override the competition that comes with inclusion of digital assets such as cryptocurrencies.  

Since BugRaptors as a Quality assurance service provider is closely involved with BFSI organizations aiming to define their regulatory travel, we are aiming on all possibilities that can help attain the compliance benchmarks. 

COVID-19 Recovery, Social Responsibility, And Vulnerable Groups 

The sudden outbreak of the pandemic led to huge economic disruption at the global stage. One of the most significant impacts of the same appeared with loss of social and development gains that appeared from the digital divide.  

Nevertheless, the social contribution made from diverse industries and verticals captured the eyes of customers, employees, as well as investors. This made way for regulatory agencies to focus on social agendas of the businesses and harness them to widen the overall social agendas of the government. 

Especially, when there are no established standards for firms on how they must reflect on the social aspect of the operations, initiatives like EU Taxonomy Regulation that came into existence at the end of 2021, widens the scope for social objectives. Besides, the reforms even included the recent actions of US regulators working on evaluating how existing regulations can be amended for implementation of Artificial Intelligence in consumer finance for overcoming bias in lending and other operations.  

Going Beyond The Regulatory Perimeter 

Considering the unpredictability and need for social contribution, the regulatory perimeter is quickly expanding. This has made way for organizations that are taking over incumbent agencies in offering financial services through buy-now-pay-later like models. These include most FinTechs and technology brands that do not even own a banking license.  

Regulators are therefore working to check on new entrants finding greater information on the payment system plans offered by these newbies. Besides, the European Parliament is also working to filter more businesses through Digital Markets Act limiting various tech brands that are changing the BFSI sector. Such provisions have even pushed countries like Australia, the United Kingdom, and Ireland to define new regulations relating to BNPL services.  

Another aspect of this regulatory expansion aims to cover cryptocurrencies, digital assets, tokens, and various other products/services that fall under the category. While the United States is working to establish a regulatory framework for digital currencies, the Markets in Crypto-Assets Regulations is likely to be the official European regulation that will come into operation by 2024.   

Aiming At The Digitalization  

Digitalization is going to be the game changer when it comes to changing regulations in the BFSI sector. From evolving expectations of the customers to technologies that streamline the entire delivery process, there are so many things that need stronger fundamental regulations. Especially, for all the solutions that work on analytics and artificial intelligence, there is a need for an improved internal control environment and risk management.  

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There is an immediate need to form a balance between governance and innovation as a part of the regulatory framework for all digital BFSI initiatives. This is why the EU AI regulation is framing guidelines that keeps a watch on consumer interests and contains a risk-based approach with effectively described criteria for high-risk AI systems. On the other hand, the US governance agencies are only working on voluntary guidelines at the moment.  

Considering The Geopolitical Risks 

Geopolitical risks, is the next important factor that makes the entire regulatory process more complex to work, especially for firms that work across global boundaries. For instance, any conflicts rising between two nations create the need for strategic autonomy and protectionism. On top of that, there are parameters like climate-related regulation, disclosures, and privacy concerns, that need global attention. Also, there are areas like data, emerging technologies, and sustainable finance that need cross-functional integration on political risk management in context to strategy, governance, and overall strategy.  

Here data is likely to be the factor that causes fragmentation of the finance industry. Though data allows democratization which enables Finance and Banking firms to get over inefficiencies, it even leads to concerns related to data usage ethics and compliance. Therefore, it becomes important to look for governance strategies that can help with global convergence.  

Saving The Infrastructure & Ecosystem 

Another important challenge that makes it difficult for international agencies to define the regulatory guidelines surrounding BFSI sector is cyber and physical threats. The growing scope, and frequency of such threats have created a greater need for operational resilience. Moreover, the need for supervision has pushed the financial institutions to go for outsourcing to third-party agencies for risk management.  

The growing severity requires more comprehensive anticipation to avoid disruption of threats within the organizational perimeter as well as throughout the ecosystem containing people, processes, and all the critical data that runs the services.  

Resilience & Agility 

When we say digitalization of the banking industry, there are many organizations that have or are still struggling to align with the change and compete with the FinTech giants. It creates a pocket for greater agility in the banking firms with the adoption of better governance strategies and change management with real-time upgrades on cultural, organizational, and technological aspects. Such moves could not only help with competitiveness but even strengthen the regulatory benchmarks.  

A quick approach to the same could be RMBD or risk management by design, which works on risk identification and fostering the regulatory and compliance obligations for all the products or services. Besides, RMBD could work as guardrail to the data governance objectives making BFSI agencies to place right information at right place at the right time. Moreover, if pursued through effective banking or finance app testing services, it could help with well-assessed compliance performance.  

Concluding it all, the extensive digitalization and shift of people towards virtual banking and finance services require more focus on agility, security, compliance, and overall governance. However, the process involves working through complex environments that include challenges like global fragmentation, environmental challenges, political scenarios, etc.  

Nevertheless, pertaining to the need of customers and competition, it is essential the all the changes related to regulations must be preserved well in time. And it can either be achieved through clearer policy definition or with sound focus on quality assurance and testing services that can align BFSI sector with the future.  

And if you are a banking firm or a fintech platform that needs to align with global digitalization initiatives while meeting the compliance related objectives, we can lend you a helping hand at BugRaptors.  

For more information, reach us through info@bugraptors.com  

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Achal Sharma

Achal works as QA engineer in BugRaptors. He is well versed with manual testing, mobile application testing, game testing, compatibility testing , Regression testing and sanity testing and able to create effective documentation related to testing like test case, test report etc.

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BugRaptors is one of the best software testing company headquartered in India and US, which is committed to cater the diverse QA needs of any business. We are one of the fastest growing QA companies; striving to deliver the technology oriented QA services, worldwide. BugRaptors is a team of 200+ ISTQB certified testers, along with ISO 9001:2018 and ISO 27001 certification.

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