Digital Transformation of Financial Regulators and the Emergence of Supervisory Technologies (SupTech): A Case Study of the U.K. Financial Conduct Authority

Abstract

The ability of financial regulators to supervise the fast-evolving and technologically enabled world of financial services is uncertain. Scars from the 2007–2008 crisis remain and, with novel technological approaches being deployed at an unprecedented rate, the question of regulatory ability is often overlooked. How can financial regulators meet the challenges of this growing ecosystem and prevent harmful outcomes for consumers and markets? Could supervisory technologies (SupTech) be the answer?This article provides a case study of the use of SupTech by the U.K. Financial Conduct Authority (FCA). Through 16 qualitative interviews with senior colleagues at the FCA and other regulators, this study focuses on how the field of SupTech has emerged and how the FCA developed its SupTech tool (BLENDER) to monitor market abuse in financial markets.Novel institutional drivers of SupTech emergence are identified, centering on ‘regulatory competition’ and how regulators’ mimetic behaviors result in competition and potentially contribute to further SupTech growth. Through a dynamic capability lens (Teece et al., 1997), the research also provides insights into the development journey of a SupTech tool.The article provides an important foundation for the research of SupTech and calls for further explorations within this field to provide regulators with the insight needed to deliver their objectives in the interest of consumers, firms, and markets.

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