What is RegTech and Why does it Matter?
"RegTech", short for Regulatory Technology, refers to the use of technology to help organisations comply with regulations efficiently and at a lower cost. When applied to government services, RegTech can play a crucial role in improving the way citizens are served.
This article provides a breakdown of RegTech, how it works and why it matters.
What is RegTech?
First coined by the UK’s Financial Conduct Authority in 2015, RegTech is the use of information technology to enhance regulatory and compliance processes. This is particularly impactful in heavily regulated industries such as financial services, gaming, healthcare, pharmaceutical, energy, and aviation. It refers to any technology that ensures companies comply with their regulatory requirements, such as software or cloud-based solutions used by financial institutions.
How does it work?
RegTech focuses on regulatory monitoring, reporting, and compliance, and aims to enhance transparency, consistency, and standardise regulatory processes. It works by applying various technologies, such as artificial intelligence, blockchain, cloud computing, and big data, to automate, simplify, and optimise regulatory tasks. Some examples of RegTech applications are:
Identity verification and authentication
RegTech can help verify the identity and credentials of customers and employees, using biometrics, facial recognition, or digital signatures, to prevent fraud, money laundering, and identity theft.
Regulatory reporting and analytics
RegTech can help collect, process, and analyze large amounts of data from multiple sources, using natural language processing, machine learning, or data visualisation, to generate accurate and timely reports for regulators and stakeholders.
Risk management and compliance
RegTechcan help monitor and assess the risks and compliance status of regulated entities, using predictive analytics, anomaly detection, or smart contracts, to identify and mitigate potential issues or violations
Why does it matter?
RegTech matters because it can dramatically improve the operations of both regulators and regulated entities and directly benefit citizens through dramatic improvements in the services being delivered.
Reduced cost and burden of compliance
RegTech can reduce the costs and burdens of compliance, enhancing the efficiency and effectiveness of regulation by applying them consistently and accurately. A number of sources report that the savings able to be reaped by regulators are in the order of multiple billions even trillions globally. For example:
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Improve the impact
RegTech can improve the outcomes and impacts of regulation, including the ability to deliver mobilisation and enforcement of regulation in real-time by allowing government agencies to promptly identify and rapidly address issues and significantly enhancing the overall responsiveness and effectiveness of public services.
Improve security and privacy
RegTech can strengthen data security and privacy measures, safeguarding citizens' sensitive information. This is particularly important in government services where the handling of personal data is extensive. It can also employ advanced analytics and artificial intelligence to detect and prevent fraudulent activities, protecting both the government and citizens from financial losses and security threats.
Risk Management
RegTech can help government agencies better assess and manage risks more effectively, providing government agencies with insights to proactively address potential issues. This contributes to better decision-making and overall governance.
Innovation and Collaboration
RegTech can foster innovation and collaboration in the regulatory environment by facilitating interoperability and standardisation of data formats and processes across different government departments and jurisdications, ensuring a more cohesive and integrated approach to service delivery,
Better access to government services
Through the use of technology, citizens can have better access to government services and information. RegTech can contribute to the development of user-friendly platforms, mobile apps, and online portals, making it easier for citizens to interact with government services.
Further Reading
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