Rethink Compliance: From Traditional Compliance Work to a Sustainable Competitive Advantage

The starting question of this article is: Can compliance develop into a sustainable competitive advantage? At first glance, this seems unlikely, since all banks are subject to the same regulatory requirements. But on closer inspection, it becomes clear: the difference lies not in the rules, but in how they are implemented. Institutions that manage compliance efficiently, intelligently, and strategically can reduce costs, build trust, and respond more quickly to market changes. This opens the door to a genuine competitive edge.

The term “rethink” – that is, to think anew, to question, to reconsider – is a call to move compliance out of its purely regulatory corner and anchor it as a value driver within a bank’s overall strategy. This is not about superficial changes, but about a fundamental shift in the following perspectives:

1. From control body to strategic function – moving from the classical view of preventing risks toward a more modern understanding, in which compliance actively shapes the regulatory and ethical framework that allows new business models to grow – securely, scalably, and credibly.
Example: A bank that acts in compliance with DORA at an early stage can offer digital services for critical financial infrastructures more quickly – with greater security and improved market access.

2. From cost burden to source of efficiency – moving away from a perspective focused purely on effort and business obstruction, toward resource efficiency, error minimisation, and process acceleration through technology and data intelligence.
Example: Automated, risk-based KYC processes not only ensure regulatory compliance but also enable faster customer onboarding – and thus faster revenue generation.

3. From case-by-case handling to pattern recognition – shifting from reactive handling of individual cases to proactive identification of patterns, anomalies, and trends – ideally before actual risks materialise.
Example: Integrated transaction monitoring (TM) and KYC systems enable early detection of trade-based money laundering by linking transaction data, supply chain information, and screening results

4. From meeting minimum standards to protecting reputation – moving away from a box-ticking approach driven by auditors, who are often the true opponents of a risk-based mindset, toward a view of compliance as a mark of quality for customers, investors, and regulators – as part of the institution’s brand identity.
Example: A bank with transparent ESG compliance, a robust AML system, and demonstrably effective processes holds a clear reputational advantage – particularly among institutional clients.

Of course, these are ideal-typical changes. The fact that institutions must align their compliance with a combination of rule-based and principle-based regulation requires a balanced blend of each of these perspectives – and their harmonious interaction. One thing is clear: those who view compliance merely as a compulsory task will, over time, lose efficiency, customer trust, and relevance. But those who rethink compliance – as a technology-supported, risk-based, scalable, and strategically embedded function – create space for innovation, growth, and sustainable differentiation, which can be described as follows:

1. Efficiency and scalability

Institutions that automate processes, establish clear governance structures, and use intelligent technologies can significantly reduce costs – especially when it comes to transaction volumes, customer numbers, or geographic reach. Particularly in international business models, a well-designed compliance architecture scales economically.

2. Speed and time-to-market

Banks that anticipate regulatory requirements early and can flexibly integrate them into their systems bring new products to market faster – for example, in cross-border payments or new KYC processes for digital customers.

3. Customer trust and reputational edge

Especially in B2B business, a reliable compliance culture is a mark of quality. Clients value banks that not only meet regulatory requirements but implement them in a transparent, professional, and comprehensible way.

4. Improved decision quality

A data-driven compliance function that intelligently brings together customer data from KYC, monitoring, and external sources also enables better business decisions – for instance, in risk assessments of business partners or evaluations of onboarding cases.

5. Resilience and crisis resistance

Banks with robust compliance frameworks are better equipped to handle external shocks – whether geopolitical conflicts, new sanctions regimes, or ad hoc regulatory audits. Those who are prepared can respond faster and remain operational.

Compliance can therefore indeed represent a sustainable competitive advantage – if it is understood not merely as an obligation, but as a strategic value contribution. The advantage does not lie in the regulatory framework itself, but in its intelligent, technology-supported, risk-based implementation.

The dimensions relevant to this transformation are:

• Intelligent technologies. Automation, machine learning, cloud-native compliance architectures, RegTech solutions – they turn data into decisions and routines into scalable processes. But this only works if the technologies are properly embedded and trained.
• Qualified people. No compliance system can replace human judgment. The expertise of analysts, MLROs, and governance professionals is critical –for model validation, scenario evaluation, and risk assessment. Technology, whatever its form, is a tool. People – for the time being – remain the architects and decision-makers.
• Strategic governance framework. This refers above all to risk orientation, proportionality, sustainability, and auditability. Only when governance structures, policies, and responsibilities are clearly defined can technology be used effectively. Without a framework, even the best algorithm is ineffective – and that’s still the optimistic view.

This leads to the following formula:

Technology × Competence × Strategic Governance Framework = Sustainable Compliance Advantage

Here, the “×” stands for the amplifying effect of combination: these elements unfold their full value only when combined

In the context of future-ready compliance, two terms come up again and again that are widely discussed: disruption and artificial intelligence (AI).

Disruption is not a new feature or a more agile process. Disruption means a systemic break: the departure from established value chains and roles. In compliance, this could mean:

• the shift from institution-specific compliance to “compliance as a service”
• the regulatorily accepted implementation of laws as machine-readable rules
• the integration of compliance into real-time processes (e.g., embedded AML in API chains)

The problem with disruption seems to lie in how it is understood. Many speak of disruption but, at best, mean derivative innovations. This issue led the inventor of the theory of disruptive innovation, Clayton Christensen, to clarify his strategy once more in 2020, shortly before his death, because it had been so often misinterpreted. A genuine “Rethink Compliance” approach must recognize where incremental improvement ends – and structural change begins. Otherwise, there is a risk of misallocation. And this leads us to the second term that is often overinterpreted in the compliance context: artificial intelligence (AI).AI is an amplifier – but, at least for now, not a disruptor. AI reinforces existing competitive advantages, but does not in itself create new ones, as has been shown in several academic articles in the field of strategic theory (e.g., Barney/Reeves). It enhances technological capabilities, such as:

• Efficiency. Automation of repetitive processes (e.g., alert triage)
• Detection. Pattern recognition in large data sets (e.g., in TM or KYC)
• Decision support. Scoring, clustering, dynamic risk models

However, without human judgment (bias checks, model validation) and without governance (explainability, auditability, and regulatory compliance in the use of the technology itself), even these benefits are limited. Worse still, an uncontrolled and independent risk domain can develop – one that may ultimately cause more harm than it prevents. Yet this should in no way diminish the value AI can contribute to compliance – it merely puts the concept into proper perspective. For this reason, the formula introduced earlier should be extended as follows:

(AI × Technology) × (Technical Competence + Judgement) × (Governance + Strategic Adaptability) = Sustainable Compliance Advantage

Artificial intelligence in all its forms – including AI agents – is itself a subset of technology. From a mathematical perspective, the expression “AI × Technology” may at first appear redundant or imprecise. However, in certain areas – particularly due to its autonomy from human control, as seen with generative AI – AI is “more” than previously known technologies. The above formula accounts for this aspect and highlights the amplifying effect of combining AI with other technologies. Robotic Process Automation (RPA), for instance, gains significant relevance for compliance when used in combination with AI. The term “technology” used in this formula therefore encompasses a broad spectrum – ranging from traditional IT infrastructure and cloud-native platforms, to API ecosystems, rule-based systems, workflow tools, and, not least, RegTech applications.

Constructive criticism is always valuable. And especially when terms like “rethink” or “disruption” are used, such criticism is justified, as these concepts risk becoming empty buzzwords in the marketing mainstream. This was one of the author’s motivations for writing this blog article. The most frequently heard criticism can be summed up as: “There’s nothing new here. It’s just old ideas rehashed.” And in part, that’s true. The demand is not new – but in many places, the implementation is still lacking. For example, risk-based, adaptive KYC systems are still rarely found in institutions. Compliance dashboards – where they exist – may look appealing, but they rarely play a significant role as management tools. These are just two examples. There is also a trend that everyone recognizes, but whose consequences many prefer to ignore: the underlying conditions for compliance are changing dramatically. This has implications for the aforementioned governance framework. One might provocatively argue that there is currently an attempt to respond to today’s challenges using the tools of the last century. It is already evident in other socially relevant domains that this no longer works. Within institutions, the limits of continually increasing effort levels are becoming clear – shrinking margins and, in some cases, the viability of entire business models are being called into question. “Working smarter, not harder” has yet to establish itself in the field of compliance – not because the need hasn’t been recognized, but because implementation remains a struggle. And this is exactly where a “Rethink Compliance” approach must begin.

Conclusion: Progress in Compliance Requires Differentiation

Disruption fundamentally challenges compliance and changes its underlying system logic. AI accelerates and enhances compliance, but demands strategic integration. “Rethink Compliance” means taking both phenomena seriously – and incorporating them thoughtfully into future design. Only those who understand both can turn compliance into more than a regulatory obligation: into a genuine strategic advantage.