Nasdaq Study Shows Firms Turning to AI and Data Scientists to Enhance Regulatory Compliance

Rhea-AI Summary

Nasdaq's ninth Annual Global Compliance Survey reveals a significant shift towards AI adoption in financial services compliance. 35% of respondents identified AI and advanced technologies as primary drivers of compliance process change, up from 9% last year. Firms are focusing on improving data quality, cloud integration, and cross-product surveillance.

The survey shows companies are increasingly hiring data scientists (12%) and support staff (13%) to strengthen compliance systems. Nearly 90% of respondents find reducing false positives challenging. Compliance teams maintain strong influence in business decisions, with 76% agreeing they have a seat at the table. Over 40% of firms reported increased compliance spending this year.

Positive

• 35% increase in AI adoption for compliance processes, up from 9% last year
• 40% of firms increased compliance spending
• 76% of compliance teams maintain strong influence in business decisions
• Strategic investment in data scientists (12%) and support staff (13%)

Negative

• 90% of firms struggle with reducing false positives in compliance systems
• Increased compliance spending indicating higher operational costs

Insights

Technology & Compliance Analyst

The shift towards AI and data science in regulatory compliance represents a significant transformation in financial services risk management. With 35% of firms citing AI as the primary driver of compliance changes, up from 9% last year, this indicates a major strategic pivot that could reshape competitive advantages in the sector.

The increasing focus on data scientists (12%) and support staff (13%) hiring signals a fundamental restructuring of compliance departments. This transformation aligns with Nasdaq's core business model, as their regulatory technology solutions could see increased demand. The sustained increase in compliance spending reported by 40% of firms, combined with the shift towards advanced analytics, suggests a robust growth trajectory for Nasdaq's regulatory technology segment.

Market Research Analyst

The survey's findings reveal a strategic opportunity for Nasdaq's technology and services division. With 76% of compliance teams maintaining strong influence in business decisions and 90% of firms struggling with false positives, there's clear market demand for advanced regulatory solutions.

The trend toward cloud integration and cross-product surveillance tools presents significant revenue potential for Nasdaq's regulatory technology platforms. As financial institutions redirect their technology investments from traditional workflow systems to advanced analytics, Nasdaq is well-positioned to capture market share in this evolving landscape through its regulatory technology offerings.

35% of respondents identified advanced technologies and AI as the main influences on their near-term compliance efforts

As firms adapt to a changing environment, they are hiring more data scientists and related specialists

NEW YORK and LONDON, Dec. 03, 2024 (GLOBE NEWSWIRE) -- Nasdaq, Inc. (Nasdaq: NDAQ) today released the results of its ninth Annual Global Compliance Survey, revealing the latest trends and challenges in compliance and surveillance within the financial services industry. The global survey gathered insights from 94 compliance professionals across the sell-side, buy-side, and financial market infrastructure sectors.

“The financial services industry is operating in an incredibly complex and dynamic environment, having to respond to ever more sophisticated regulatory requirements, financial crime, and operational challenges,” said Ed Probst, Senior Vice President, Regulatory Technology at Nasdaq. “Technologies like AI and cloud have the power to enhance strategic insights and dramatically improve efficiency but require a workforce able to understand, develop, and deploy the capability. We’re seeing firms increasingly turn to regulatory technology platforms and supplement their workforce with data scientists and other specialists, to handle the changes and challenges of regulatory compliance.”

Focus on AI, Cloud, and Data Quality

Faced with greater regulatory oversight, firms are focusing not only on adhering to regulations but also leveraging advances in technology to gain a strategic edge. Of the respondents, 35% expect technologies like AI to be the biggest driver of compliance process change over the next year, compared to 9% last year, and 0% the year prior. This shift marks a move away from simple workflow tools towards more data-driven investigative approaches.

Improving data quality, integrating data sources and the cloud, and developing cross-product surveillance and related tools were all identified as areas where firms are likely to invest over the next 12 to 24 months. One major challenge this could help address is in the case of false positives, where advanced data processing and AI can be used to improve the quality of alerts flagged up by automated systems. Many compliance teams have devoted significant effort to minimizing them, with almost 90% acknowledging that reducing the number continues to be extremely or somewhat challenging. These false positives can be highly disruptive, leading to unnecessary investigations, wasted resources and potential delays in identifying genuine threats.

Investment in Data Management and Skilled Teams

Looking ahead to the next 12 to 24 months, firms are redirecting their investment in talent towards data scientists (12%) and additional support staff (13%). This shift indicates a growing recognition among organizations of the critical role that advanced technology and sophisticated data analysis plays in strengthening modern compliance systems and controls. In addition, the increased demand to hire junior resources reflects a need to analyze ever increasing amounts of data, and that rapid deployment of AI and other algorithmic processes are not being delivered as part of a cohesive data, analytics and analysis strategy.

This aligns with broader trends in the finance industry where front office teams and risk functions are increasingly investing in their underlying data infrastructure and advanced technology capabilities, including the use of sophisticated tools and systems for real-time monitoring and predictive analytics.

Compliance Maintains its Seat at the Table

Surveillance and compliance teams continue to maintain a prominent voice in business decisions, with respondents either strongly agreeing (44.7%) or agreeing (31.3%) that they have a seat at the table. They are considered an integral component of risk management, ethical business practices and corporate governance to maintain and protect brand reputation and trust.

Regulatory-focused spending therefore continues to rise, although the pace of growth is moderating as firms adjust to the evolving landscape. More than 40% of firms reported increased compliance spending this year, consistent with the steady budget increases observed over the past nine surveys.

There has however been a significant shift in how organizations allocate their tech budgets, reflecting the move away from traditional workflow and transaction monitoring to invest more in advanced analytics.

The full report is available to download here.

About Nasdaq

Nasdaq (Nasdaq: NDAQ) is a global technology company serving corporate clients, investment managers, banks, brokers, and exchange operators as they navigate and interact with the global capital markets and the broader financial system. We aspire to deliver world-leading platforms that improve the liquidity, transparency, and integrity of the global economy. Our diverse offering of data, analytics, software, exchange capabilities, and client-centric services enables clients to optimize and execute their business vision with confidence. To learn more about the company, technology solutions and career opportunities, visit us on LinkedIn, on X @Nasdaq, or at www.nasdaq.com.

Media Contacts
Andy Hughes
+44 (0)7443 100896
Andrew.Hughes@nasdaq.com

Camille Stafford
+1 (234) 934 9513
Camille.Stafford@nasdaq.com

-NDAQG-

FAQ

What percentage of firms identified AI as main driver for compliance change in Nasdaq's 2024 survey?

35% of respondents identified AI and advanced technologies as the main influences on their compliance efforts, up from 9% in the previous year.

How many firms reported increased compliance spending in Nasdaq's 2024 survey (NDAQ)?

Over 40% of firms reported increased compliance spending in 2024, according to Nasdaq's Global Compliance Survey.

What percentage of firms are hiring data scientists for compliance according to Nasdaq's 2024 survey?

12% of firms are investing in hiring data scientists for compliance purposes over the next 12 to 24 months.

What percentage of firms struggle with false positives in Nasdaq's 2024 compliance survey?

Almost 90% of firms acknowledge that reducing false positives continues to be extremely or somewhat challenging.