Regulation Technology (RegTech) is an emerging area of digital strategy and compliance which is beginning to impact Australian regulators and agencies. RegTech draws on many digital hot topics – big data, process automation, machine learning and Artificial Intelligence (AI) – however there is a danger of adopting piecemeal technology solutions without considering a full business understanding.
Australian regulators and agencies are tasked with finding more effective ways of operating, with fewer resources in an increasingly complex, volatile and information-rich environment. Into this environment, RegTech is part of the solution, but can also be part of the problem.
What is RegTech?
RegTech is a technology approach that facilitates effective and lower cost, regulatory compliance. As with any emerging technology, RegTech has become something of a catch-all phrase in compliance technology. It has been matched with Financial Reporting Technology (FinTech) and addresses transactional data – from payroll in HR, to finance transactions, to IT expenditure, client identity and smart contracting.
Australia has a growing cohort of small-to-medium companies offering various regulatory compliance solutions. The value proposition for much of the RegTech offering is to reduce the cost of compliance, by reducing the manual effort involved. Robotic Process Automation (RPA) features heavily in this mix and may be the first experience for many corporate and government agencies in their RegTech journey. The technology element is only a small part of the change, much of the benefit comes from improved (or removed) workflows. For example, new digital market places for procurement have a small technological component, but the benefit in simplified contracting and reduced manual procurements is very large.
Who is buying this technology?
Much of the expenditure on RegTech is from large organisations which are impacted by a large volume of regulations – Financial Institutes, which includes banks, insurance have been the world-wide early adopters. Unlike earlier Financial Technology companies, many RegTech companies are not chasing venture capital – which means the media hype tends to be lower for RegTech.
Is this bad for agencies (will robots eat my job)?
The difficulty RegTech presents for agencies isn’t the obvious one, we aren’t likely to see the public sector replaced by chatbots any time soon. The difficulty lies in the exponentially fast increase in capability that technology provides; businesses are adopting emerging technologies which outpace the agencies that regulate them.
As agencies adopt new technologies, they need to become more sophisticated in their understanding of limitations and applications of the technology: how does the technology augment the workflows and business objectives?
Is this good for agencies (will we save costs)?
Few organisations would deliberately avoid reducing needless manual work. Time and cost savings by reducing manual effort are a direct benefit of many RegTech offerings, but the broader benefit is likely to come through increased transparency and ease of compliance.
As agencies seek to influence and modulate industry behaviour, RegTech provides a unique collaborative opportunity. The same technologies support compliance can provide early warnings to corporations and regulators. This makes compliance more transparent and increases the ability of an agency to proactively encourage (rather than reactively check) compliance. RegTech bridges a difficult communication gap, whilst increasing the scale at which an agency can operate effectively.
Is RegTech coming?
RegTech is a new word, but the area has been evolving for a long time; Computer Assisted Audit Tools (CAATs) is one example. Now a growing number of data analysts, machine learning technologists, AI vendors and business process improvement are all working inside agencies and across industry. Internationally, regulators are distributing open-source analytics products – as regulatory compliance services for industry. As this ecosystem of technologies grows, the expectations on agencies in this emerging digital environment will only increase.