The Productivity Commission's Focus on Regtech
by Leica Ison
A recently released information paper by the Productivity Commission has highlighted how there is scope for deeper adoption of software-as-a-service for regulatory monitoring, reporting and compliance. The Commission noted that Australia's Leading-edge regulatory technology (RegTech) is well placed to develop predictive analytics and real-time monitoring to enable better regulatory outcomes and fewer compliance burdens for businesses.
The Key Points from the Productivity Commission's regulatory technology information paper:
- Regulatory technology (‘regtech’) is the use of technology to better achieve regulatory objectives. Used well, it can support the improved targeting of regulation and reduce the costs of administration and compliance.
- While regtech can improve regulatory outcomes and reduce costs, it is not a substitute for regulatory reform. Indeed, as regtech is intended to make the task of regulating easier, advances in technology heighten the onus on policy makers to ensure the need for, and design of, regulation are soundly-based.
- Australia is viewed as being comparatively well-placed internationally for widespread adoption of regtech. Yet, with the exception of financial system applications, extensive use of regtech remains relatively uncommon.
- There is potential scope in Australia to extend existing low-tech solutions — including digitised data, forms, registers and transactions. These could reduce compliance costs for individuals and businesses, improve the efficiency of regulator practices, and generate flow-on benefits for the community.
- Leading-edge regtech involves the use of data for predictive analytics and real time monitoring, enabling better regulatory outcomes and potentially fewer compliance burdens for businesses. But advanced regtech requires specialised resources and long development times.
- Even in low-tech applications, widespread implementation of regtech can take some years. It can require substantial investment by regulators and businesses in capacity and cultural change while (as with technology solutions generally) enumeration of the scale and timing of the benefits can be difficult.
- There are four key areas where regtech solutions may be particularly beneficial:
- where regulatory environments are particularly complex to navigate and monitor
- where there is scope to improve risk-based regulatory approaches, thereby targeting the compliance burden and regulator efforts
- where technology can enable better monitoring, including by overcoming constraints related to physical presence
- where technology can safely unlock more uses of data for regulatory compliance.
- Creating and maintaining a regulatory environment that supports the realisation of regtech benefits would mean:
- improving the consistency and structure of data and the interoperability of, and standards for, technology — these are precursors to wider regtech adoption
- investing in the technical skills and capabilities of regulators to enable measured steps in regtech adoption
- determining accountability for outcomes associated with regtech solutions, including with regard to privacy, data security, and responsibility for resolving disputed outcomes
- reviewing regulation to remove technology-specific requirements that could prevent the take-up of beneficial regtech solutions
- creating familiarity with the possibilities of regtech (for example, through liaison forums and trials), facilitating collaboration between regulators, regulated entities and regtech developers, and establishing safe environments to develop and test regtech solutions.
Source: Productivity Commission, Regulatory Technology, Information Paper.