By Roman Eloshvili, Founder, XData Group
Nowadays, the financial services industry faces a variety of obstacles, from compliance pressures to complex operational challenges. According to a recent survey, 25% of financial services professionals underscore the complexity of the regulatory environment as one of the major difficulties to achieving compliance. Since regulatory guidelines are imposed at the national level by governments, financial firms have no choice but to comply — regardless of how dynamic or even unclear these requirements can be.
On top of that, challenges such as high costs, lack of IT infrastructure, and talent shortages also impact compliance processes which should obviously be effectively addressed as well. And in the face of growing pressure, we can expect that modern technologies, particularly artificial intelligence, will become a strategic solution. AI, already widely adopted in the financial sphere, may help ease regulatory pressure and overcome the mentioned barriers.
But how exactly can it help to deal with these challenges, and what role does it play in switching from reactive to proactive compliance?
AI adoption as a means to surmount challenges
As I have mentioned earlier, the adoption of artificial intelligence and its integration into a company’s workflow could ease the burden on financial firms and help to solve certain problems In what ways specifically?
Firstly, it may aid in optimizing costs by automating compliance tasks, embedding more efficient audit procedures, and minimizing errors. By streamlining routine processes, AI notably reduces the need for manual labour, which allows financial firms to allocate resources more effectively. In other words, it helps cut down operational expenses, even the Nvidia’s survey shows that 94% of industry professionals believe that AI has helped reduce annual operations costs.
It can also help with the lack of IT infrastructure which primarily refers to small and medium-sized enterprises (SMEs) or startups — the businesses that often experience a scarcity of servers and data management tools to maintain compliance. Here, such technologies as cloud-based AI solutions or AI-powered SaaS compliance tools help to respond to the issue efficiently. They provide pre-configured cloud IT setups that include built-in policies, tools, and security protocols to align with regulations such as ISO 27001, HIPAA, or GDPR. So, they could serve as a solution for small businesses that do not have advanced technical infrastructure.
While it may not be a common topic of conversation, the talent shortage is undeniably a real issue. Almost 75% of employers globally report that they experience difficulties in filling the roles as there is a lack of candidates with necessary skills. This has also affected the financial selector and now it is one of the key obstacles for financial companies to stay compliant. And in this case AI proves helpful once again as real-time AML fraud detection or sanctions screening enables compliance specialists to configure rules without, for example, coding skills. Smart technologies assess the rules’ effectiveness and update them autonomously.
From reactive to proactive compliance
AI also plays a crucial role in the transition from reactive to proactive compliance. But what does it mean? Reactive compliance is a specific approach that involves addressing issues after they occur. Meanwhile, proactiveness implies taking steps to prevent compliance issues before they happen.
It is critical for financial firms to embrace a proactive approach to compliance because of two reasons. Firstly, staying in a reactive compliance state could lead to regulatory fines, reputational damage, and operational inefficiencies. Secondly, proactive compliance allows organizations to ensure that potential harm to consumers is minimized due to risk forecasting.
There are some other key points that make proactive compliance a more favourable option, including predictive analytics and real-time monitoring. Predictive analytics implies that AI uses historical data and machine learning to foresee potential compliance issues. This is further confirmed by Deloitte’s analysis, which stresses that predictive analytics is utterly helpful, but companies need to be open to embrace this technology.
Proceeding to real-time monitoring, AI continuously tracks both internal policies and external regulations. For instance, financial transactions or employee activity are compared to the latest regulatory requirements through real-time data evaluation. If changes are detected — the system automatically embeds recent updates and adjusts internal controls to align with new compliance requirements. This makes compliance proactive when changes are made before risks can escalate.
What does the future hold for financial firms?
Financial organizations should be prepared to adapt to evolving regulations, keep an eye on growing risks, and continuously upgrade their compliance strategies to thrive in the future. With this in mind, we can expect that the ongoing evolution of regulations will continue challenging financial firms, further amplifying the pressure they encounter. This rising scrutiny from regulatory bodies, the risk of penalties for being non-compliant, and reputational damage could hinder growth and undermine customers’ trust.
To handle this, switching to proactive compliance is no longer optional — it is a necessity for continuous development.
While AI provides substantial support in the transition from reactive to proactive compliance, people should not rely solely on technology. They need to act proactively alongside AI and do not treat it like an autonomous solution. Professionals could identify emerging risks based on the AI-generated data or engage in manual review with the help of AI insights. So, it’s mainly about cohesive collaboration — where machine intelligence and human expertise complement each other.
As a result, financial firms could not only mitigate risks but also gain a competitive edge in the market.
Roman Eloshvili is the Founder of XData Group, a B2B software development company with a focus on the European banking sector. Roman is a C-level executive, boasting over 20 years of experience in business administration and development of fintech solutions for banks.
