October 12, 2020 | technology | No Comments
An information paper by the Productivity Commission has highlighted how there is scope for Australia to adopt regulatory technology (regtech) beyond the financial sector, with the belief it can improve regulatory outcomes and reduce the costs of administration and compliance.
In its regulatory technology information paper [PDF], the Productivity Commission noted how Australia is “well-placed” to develop regtech solutions given its “relatively stable and sophisticated” regulatory systems, but currently, extensive use of regtech remains relatively low.
“Low awareness can dampen both demand and supply responses — business need to see value in changing their software so that developers see value in investing in applications, which in turn deliver the value businesses need to see,” the paper stated.
It went on to suggest that Australia could extend its existing use of “low-tech” solutions, including digitised data, forms, registers, and transactions to streamline business and individual transactions with government, as well as reduce compliance costs, improve the efficiency of regulatory practices, and generate flow-on benefits to the community.
Some of the specific areas that the Productivity Commission believes regtech solutions could benefit from include where regulatory environments are particularly complex to navigate and monitor, explaining that there is scope to improve risk-based regulatory approaches; technology could enable better monitoring; and technology could safely unlock more uses of data for regulatory compliance.
While regtech could improve regulatory outcome, it should not be used as a substitute for regulatory reform, the Productivity Commission warned.
The paper also examined the costs, risks, and hurdles associated with the wider adoption of regtech. It pointed out that while regtech has the potential to deliver benefits, the wide-spread implementation of it could take some years, particularly when it comes to the adoption of “advanced” regtech, which requires specialised resources and longer development times.
See also: 3 ways to manage regulatory and compliance changes (TechRepublic)
The Productivity Commission also said the likelihood of implementing regtech solutions well and realising the benefits would depend on a range of conditions, such as technical and contract management expertise, organisational willingness, and the capacity to change.
Further, the paper highlighted that a lack of interoperability between regtech solutions and IT systems could be a major obstacle to uptake. It pointed to how the current technology used by the Australian Securities and Investments Commission to maintain its business registers is approaching 30 years old, as an example.
The paper suggested that governments needed to collaborate with other parties — regulated entities, regtech developers, and third-party providers of services — to create and develop a regulatory environment that supports regtech adoption, as it would result in improving the consistency and structure of data.
The commission added that it would lead to increased investment in technical skills and capabilities of regulators to enable regtech adoption, result in a review of regulation that has prevented the take-up of regtech solutions; increase collaboration of regtech solutions, and enable greater opportunities for testing.
Additionally, the Productivity Commission took the opportunity in the information paper to outline some of the considerations that policymakers and regulators need to take into account as part of their role to ensure the need for, and design of, regulation are sound. These include keeping up to date with the pace of technology development, providing greater certainty about regulatory agendas and the timing of reforms, as well as ensuring the data security and privacy are dealt with.
Australia’s financial services sandbox gets a makeover
The new enhanced regulatory sandbox will allow the testing of a broader range of financial services and credit activities for a longer duration.
ASIC wants to see more adoption of regtech by Australia’s financial sector
It claims there’s “enormous potential” to use regtech to detect breaches and misconduct.
Sweeping change: Fintech committee offers ‘quick wins’ fix to Australian ecosystem
The Senate committee probing fintech and regtech has made 32 recommendations. Here’s everything they say could fix the problems with financial services innovation in Australia.
Senate committee to probe Australia’s fintech and regtech opportunity
The committee will look into the current state of Australia’s fintech and regtech industries, and investigate opportunities to promote ‘effective and sustainable growth’.