The State of Suptech Report 2022

Simone di Castri, Matt Grasser, Juliet Ongwae, Jose Miguel Mestanza, Adebola Daramola, Alexander Apostolides, Kyriakos Christofi, Philip Rowan, Yue Wu and Bryan Zhang

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The report presents insights on the current state of the digital transformation of financial supervision worldwide. It provides global snapshot across several facets of suptech, including underpinning digital infrastructure and technologies, supported supervisory use cases, approaches employed for developing and deploying suptech applications, and the related challenges and risks.

Highlights from the report

  • Suptech ‘is happening’. Most financial authorities have already engaged in suptech initiatives. While suptech development is still at a nascent stage with room for growth, the survey results indicate that 71% of financial authorities are rising to the challenge as we see the adoption of suptech solutions, strategies and roadmaps increasing.
  • Suptech efforts remain in the experimentation stage, primarily focused on improving data collection and basic analysis. Based on the classification provided by the Bank for International Settlements (BIS 2019) and revised by the Lab in this report (see chapter 3), the technologies deployed by financial supervisors mostly fall into the first or second generation of data architecture, and mainly support data collection as well as descriptive and diagnostic analytics.
  • Most suptech use cases centre around consumer protection and prudential supervision. 59% of financial authorities report their suptech applications being deployed in support of consumer protection supervision, while 58% report their suptech applications support prudential supervision use cases.
  • Significant challenges to suptech adoption remain to be addressed. Limitations in budget, data quality and technical skills remain the most significant barriers to implementing suptech. There is a remarkable mismatch between the experience of financial authorities and vendors when it comes to procurement, with technologies providers urging the public agencies to address legacy procurement processes. Financial authorities also express an unmet need for data teams, data sharing and data synthesis as a foundational part of their modernisation.
  • There are significant distinctions in the state of suptech in emerging markets and developing economies (EMDEs) as compared to advanced economies (AEs). Financial authorities in AEs are early adopters of suptech, more often have sufficient digital infrastructure, more often assign dedicated suptech roles and departments, have seen more substantial internal outcomes than those in EMDEs, and seek funding primarily to grow their teams. EMDEs agencies tend to run suptech initiatives within the supervision department itself, are more interested in trainings, technical assistance, digital tools, and seek funding primarily for design and development of suptech.
  • Financial authorities in EMDEs and in AEs face very similar challenges in the digital transformation of their supervisory process and capabilities. Agencies in EMDEs and AEs report lack of budget being the main constraint to the development and deployment of suptech.
  • Centralised data office models to accelerate suptech development and implementation are emerging. Thirty five percent of the surveyed financial authorities have a dedicated centralised office reporting to a Chief Data Officer who is either solely responsible for the suptech initiatives or works with other functions to develop and deploy suptech.
  • Funding to accelerate the suptech market is a key area of focus. Although suptech vendors report some secondary support from grants, funding for financial authorities’ suptech initiatives comes primarily from the financial authorities themselves. Most suptech solutions are provided by external sources like contracted vendors and purchased off-the-shelf software, yet these vendors also report challenges in funding and an ability to deeply understand financial authorities’ prioritised needs.
  • The top suptech challenges differ between agency types. For central banks, the challenges are primarily related to internal culture and strategic buy-in. For capital markets, securities, and investment instruments supervisors, challenges tend to be related to upgrading their existing systems and processes. For other supervisors, the uniquely prominent challenges are with IT systems.
  • Most authorities still do not have a gender data strategy. Only 21% have a currently operating strategy, 9% have one in development, while 70% report no strategy at all.
  • Suptech is enabling new supervisory use cases that would not otherwise be possible. While suptech solutions use chatbots and APIs to optimise existing processes and augment legacy tools, others are opening completely new opportunities for supervisors. The ability to ingest massive online datasets like social media streams to conduct sentiment analysis, to parse online reviews to assess risks or identify fraudulent fintech apps, and to conduct real-time, on-chain analyses for digital assets supervision are just a few of many examples.