(As published in Scotsman Guide, Residential Edition, May 2025)
Financial institutions should stop relying on unsustainable manual processes
Banking has become a technological wonderland: customers deposit checks through mobile apps, open accounts via tablets and manage investments through artificial intelligence-powered platforms. Yet behind this digital facade lies a troubling reality: 42% of banks, credit unions and other lenders still “often” rely on manual processes for regulatory compliance, according to Wolters Kluwer’s latest Regulatory and Risk Management Indicator survey. Another 31% do so “sometimes” — even as they pour resources into client-facing digital transformation
This technological divide isn’t just an operational inefficiency — it’s rapidly becoming an existential threat to financial institutions. As regulatory requirements grow more complex and often contradictory across state lines, the limitations of manual processes are creating mounting risks that many institutions seem unwilling or unable to address.
The survey reveals a stark paradox: while 64% of institutions plan to accelerate investments in digital lending and 63% anticipate increased automation of regulatory change management systems, many compliance departments remain trapped in the spreadsheet era. This gap between ambition and reality is particularly concerning as institutions face unprecedented regulatory challenges.
Consider the current landscape: 69% of respondents cite high or moderate concern about implementing Section 1071 requirements for small business lending data collection, while 61% worry about keeping pace with fair lending regulations. Another 60% express anxiety about new Community Reinvestment Act requirements. Yet despite these mounting pressures, manual processes and competing business priorities remain the biggest obstacles to maintaining effective compliance programs.
“You might have a multi-billion-dollar institution using spreadsheets for regulatory compliance,” noted one chief compliance officer who recently evaluated their organization’s technology stack. “It’s honestly scary to think about, but they’re out there — and you see them in the headlines.”
Business case
The hesitation to invest in compliance technology often stems from a familiar challenge: demonstrating return on investment in an area traditionally viewed as a cost center. The survey suggests attitudes are shifting, however. Technology is now deemed the most important aspect of automating regulatory change management programs by 31% of respondents, with speed, analysis and maintaining a regulatory library following closely behind.
Risks mount for failing to invest in regulatory compliance technology
- Nearly two-thirds of financial institutions plan to spend more on digital lending.
- Often these resources are devoted to client-facing technology.
- But 42% of these institutions rely on manual processes for regulatory compliance.
- Compliance can often be complex and even contradictory across state lines.
- Just 61% of respondents expect a reduction in compliance demands in the coming years.
Forward-thinking institutions are finding success by quantifying the hidden costs of manual processes. The survey shows that managing regulatory change remains a dominant concern for 64% of respondents. Automated systems can dramatically reduce the time spent on routine compliance tasks, freeing staff for strategic initiatives.
Almost one in three organizations still manage risks without a formal enterprise risk management program. With cybersecurity threats (59%) and compliance risks (41%) topping the list of concerns, the need for robust technological solutions becomes increasingly apparent.
In an era of what one compliance executive termed the “gray tsunami” of retiring compliance professionals, institutions relying on manual processes struggle to attract and retain talent. The survey indicates increasing investment in compliance management systems, with 56% prioritizing regulatory content management and 50% focusing on updating policies and procedures.
Fundamental shift
Moving further into 2025, the compliance technology gap will become increasingly unsustainable. While institutions express increased confidence in managing regulatory challenges, this confidence may be misplaced if not backed by technological transformation.
The solution requires more than just technology investment — it demands a fundamental rethinking of how institutions approach compliance. The survey shows encouraging signs of this shift, with anticipated spending on compliance management systems rebounding across most areas. Skepticism remains high regarding potential reduction in regulatory burdens, with 61% viewing such reductions as unlikely.
The spreadsheet era of compliance is ending. Those that act now to modernize their compliance technology will be better positioned to navigate an increasingly complex regulatory landscape.
As one compliance officer put it, “If you’re not thinking about automation now, even if it’s just a rudimentary solution to get you started, you’re already behind.” In an era of increasing regulatory complexity and diverging state requirements, that’s a position no financial institution can afford to maintain.