Making suptech work: evidence on the key drivers of adoption
Summary
Focus
Financial supervision is becoming more complex as markets digitalise and risks evolve. Supervisors need new tools to keep up with the growing flow of data and emerging threats such as cyber and climate risks. Supervisory technology – or suptech – uses digital tools like artificial intelligence and cloud computing to make supervision more effective. Many authorities are experimenting with these tools, but only a few have moved from pilot projects to full use.
Contribution
We examine the institutional drivers of the adoption of suptech by financial authorities worldwide. Using survey data from 112 authorities across 97 countries and a two-stage hurdle model, we analyse how organisational characteristics and strategic frameworks shape adoption along the suptech lifecycle, from proof of concept to full deployment. We contribute to the literature by providing the first systematic, cross-country econometric evidence on the determinants of suptech adoption. We extend previous case-based and descriptive studies by integrating institutional, strategic and technological dimensions into a unified analytical framework.
Findings
We find that while implementing any single strategy for digital transformation, data governance or suptech in isolation is insufficient, authorities that adopt an integrated approach combining all three deploy substantially more applications and face fewer design and implementation challenges. The size of the authority and a more focused institutional mandate are important factors for initiating advanced projects, but establishing a dedicated suptech unit is the strongest driver in moving from experimentation to deployment. Our analysis also shows that public cloud adoption increases the likelihood of implementing artificial intelligence tools, while reliance on in-house development is more closely linked to early-stage experimentation. Together, these findings highlight that coherent strategies, supportive organisational structures and enabling technologies are key to effective and increased adoption of suptech within financial supervision.
Abstract
This paper examines the institutional drivers of adopting supervisory technology (suptech) by financial authorities worldwide. Using survey data from 112 financial authorities across 97 countries from the State of SupTech Report, we analyse how organisational characteristics and strategic frameworks shape the adoption of suptech initiatives. The analysis employs a two-stage hurdle model to track adoption from proof of concept to prototype, and finally to full deployment. We find that authorities with institution-wide strategies for digital transformation, data governance, and suptech deployment use, on average, about 20 additional applications and face fewer design and implementation challenges. Furthermore, while an authority's size and institutional mandate are significant factors in initiating advanced projects, the establishment of a dedicated suptech unit is the most critical factor in increasing the number of deployed applications. Finally, we find that public cloud adoption is associated with a higher probability of implementing AI tools, while reliance on in-house development is strongly associated with early-stage AI experimentation.
JEL classification: G28, O33, C25
Keywords: suptech, financial supervision, technology adoption, financial authorities
