• Nadish Lad, Global Head of Product and Strategic Business at Volante Technologies


• 15.09.2025 10:00 am
#FinancialServices #RegTech

Many financial institutions consider regulatory compliance the main obstacle to innovation. And some may argue that this thinking makes sense: rules are complex, oversight is increasing, and non-compliance can carry severe consequences.

But on further investigation, data tells a different story. In fact, research shows that although 39% of financial institutions identify compliance and regulatory change as a top challenge, it still trails behind other barriers such as skills gaps and legacy infrastructure.

So is regulation really the culprit, or is it actually being used as a scapegoat? It’s clear that the real issue isn’t regulation but inherent issues within organisations. Legacy technology, fragmented operations, and slow approvals have created environments where compliance has become cumbersome and unnecessarily complex.

Rules versus processes  

Understanding the difference between genuine regulatory requirements, and internal process failures masquerading as compliance issues, is crucial. Real regulatory blockers are specific legal requirements that directly prevent certain business activities. Self-imposed constraints, however, stem from inflexible systems, overly cautious cultures, or poorly designed processes that make compliance far more complicated than it needs to be.

Financial institutions need to audit their operational bottlenecks honestly. When a new product launch gets delayed, ask the hard question: does regulation explicitly forbid it, or does the compliance team simply lack the tools to evaluate it quickly? Most often, it's the latter. By clearly mapping regulatory requirements against internal capabilities, firms can identify where the real problems lie.

The regulation blame game 

Compliance has been unfairly identified as an innovation blocker. While it is true that new requirements add workload, compliance has become a catch-all excuse to justify delays in upgrading infrastructure or pursuing new strategies. Blaming regulation often masks a reluctance to confront the scale of change required internally, or a lack of consensus within organisations about how to prioritise investment.

The reality is that well-designed compliance should enable innovation, not block it. Good regulatory processes provide clear boundaries within which firms can operate confidently. When compliance becomes a barrier, it's usually because the underlying infrastructure was never built to handle regulatory requirements efficiently.

Innovation starts with infrastructure 

True competitiveness depends less on meeting regulatory deadlines and more on building resilient, adaptable systems. Legacy infrastructure is a far bigger drag on growth than regulation, making even small changes slow and costly. Many banks still run on decades-old systems, with layers of custom code and workarounds. In fact, 72% of financial institutions cite the complexity of core legacy systems as their biggest challenge when modernising payments infrastructure. This entrenched complexity makes every regulatory update feel heavier than it really is.

By contrast, institutions that invest in modern, cloud-based architectures and real-time data capabilities find themselves more adaptable. The Bank of England’s move to replace the UK’s outdated Faster Payments infrastructure highlights that legacy technology, not regulation, is the real barrier to progress. With flexible foundations, financial institutions can implement regulatory changes through configuration rather than costly bespoke builds. Moreover, these modern systems unlock new possibilities for product development, integration with fintech partners, and improved customer experience.

Making compliance a catalyst

The most forward-looking firms use regulation as a trigger for transformation, not a reason to stall. Each new compliance requirement becomes a business case for better infrastructure, improved processes, and stronger organisational capabilities. Instead of patching old systems to meet new rules, these firms use regulatory deadlines as catalysts for comprehensive upgrades.

This approach requires building flexibility into core systems from the ground up. Technology should be designed to anticipate and accommodate regulatory change, not just react to it. This means choosing modular platforms that can be reconfigured quickly, implementing real-time monitoring and reporting, and treating compliance teams as strategic partners. When regulation drives improvement rather than paralysis, firms find they can meet compliance requirements whilst simultaneously delivering better customer experiences and greater operational efficiency.

Stop blaming, start building 

Ultimately, regulation itself isn’t the enemy. A robust approach to compliance not only protects customers but also builds trust and helps maintain an equitable environment.

The fact that regulation exists isn’t the problem; the true issue lies in how financial organisations adhere to it. Continuing to treat regulation as a barrier will only lead to being put at a disadvantage, while competitors steal market share with greater agility and superior tech solutions.

Early investment in forward thinking processes and compliance ready technology will enable firms to view regulatory requirements as a trigger for innovation, and position them with a competitive advantage. Financial services leaders will be those who no longer see regulation as an inhibitor but as a strong foundation for innovation and growth.