The Recursive Relationship Between Technology and Regulations: Managing Landscape Frictions in the Financial Services Industry

Firms increasingly rely on information technology (IT) to meet regulatory demands, yet information systems research typically examines organizational responses to individual regulations. This leaves unclear how firms adapt when multiple regulations with fragmented purposes simultaneously govern shared data, technologies, and expertise, and when technologies introduced for compliance themselves become objects of regulation. We investigate this problem through an analysis of 624 documents covering 44 major European Union regulatory frameworks, assisted by topic modelling and a large language model, and 60 interviews with experts and senior practitioners in Nordic financial services. We develop the concept of landscape frictions: structural tensions that emerge from the asymmetry between fragmented regulatory purposes and integrated organizational practice. We identify three such frictions and corresponding responses: purposive fragmentation prompts firms to reconcile operational and strategic data governance; recursive dynamics prompt them to design reversible IT architectures; and categorical ambiguity prompts them to translate logics across functions and organizational boundaries. Each response enables compliance while also generating constraints that sustain or intensify other frictions. The study contributes to IS research by shifting the unit of analysis from the bilateral regulation–firm relationship to the regulatory landscape–firm relationship and by explaining the recursive relationship between regulation and IT as an ongoing process rather than a succession of discrete compliance events. For managers and policymakers, the findings identify three landscape-level risks: reconciliation, reversibility, and translation risks, that complement conventional assessments of regulatory and technological risk.