From fintech to regtech: a new area for innovation focus

Share on twitter
Share on linkedin
Share on facebook

By Dr Drew Donnelly, Compliance Quarter.

Today, continuing in our series of articles concerning developments in the fintech regulatory space (including blockchain), we discuss regulatory technology or ‘regtech’. Specifically, we look at a recent report from the Australian Securities & Investments Commission (ASIC) on its fostering of the sector.

What is regtech?

In many industries, both in Australia and internationally, regulatory compliance is becoming increasing complex – and costly. At the same time the risk of non-compliance for a business is growing, both through increased enforcement and the potential for reputational damage. By way of example, in Budget 2017 and financial services: an opening for the minnows and a warning for the sharks, we discussed the Government’s implementation of a new banking executive accountability regime, as well as increased funding to the Australian Competition and Consumer Commission (ACCC) to carry out investigations.

In light of increasing compliance complexity, it is essential for businesses to find more efficient mechanisms for managing compliance. This is where Regulatory Technology or ‘regtech’ comes in. Just as fintech leverages technology to drive more efficient and effective financial services, regtech uses technology to drive similar improvements in regulatory compliance.

Applications of regtech

In Future possibilities for Australian business with blockchain we talked about some different possible applications of blockchain technology. Some of those potential applications, such as identity verification, could be employed as regtech solutions.

Another example of a regtech solution is a cognitive platform. On 14 June, IBM launched a range of products designed to help financial institutions meet their regulatory responsibilities. IBM’s cognitive platform supports these products by learning regulations (60,000 regulatory citations to date) and then reviewing transactions for compliance.

Specific regulatory areas where regtech could be deployed, include:

  • For example, market regulators often require the reporting of vast quantities of transaction data (both to the regulator and internally). Regtech could be utilised to flag any suspicious transactions
  • Human resources and organisational monitoring. Regtech could be used to flag internal documents and behaviours using algorithms that pick out unusual or risky behaviour
  • Modelling and forecasting. Regtech could enable both businesses and regulators to better predict trends in their industry.

ASIC’s fostering of regtech

In mid-2016, ASIC extended its Innovation Hub, which supports fintech innovation in Australia, to include regtech innovators. In a report released on 26 May 2017, ASIC discusses its proposed future direction for regtech in Australia.

Aside from informal support for regtech developers through the Innovation Hub, there are several other areas where ASIC is currently working to support the regtech space:

  • Engagement with the regtech community
  • Technology trials, including a cognitive tool to assess the webpages of providers of self-managed superannuation funds and a social media monitoring tool
  • International referrals. Through agreement with overseas regulators, ASIC can refer businesses to their overseas regulator counterpart.

ASIC’s proposal for future direction includes:

  • Initiating a new regtech liaison group
  • Continued use of technology trials
  • Hosting a problem-solving event, otherwise known as a “hackathon”. This could be on a particular topic such as regulatory reporting or cybersecurity.

ASIC welcomes feedback, particularly on the future direction for regtech, by 5 July 2017. The report is available here

To discuss our own Regtech systems, contact us today.

More to explorer

Technicians installing photovoltaic solar panels on roof of house.

Compliance Quarter’s Submission to the AER’s Review of the Compliance Procedures and Guidelines

On 11 April 2024, Compliance Quarter put forward its submission on proposed changes to the AER Compliance Procedures and Guidelines. The AER is reviewing its Compliance procedures and guidelines, which set out the manner and form in which energy businesses in jurisdictions that have adopted the National Energy Retail Law must submit compliance information and data to the AER. We argue that there should be consideration of measures to incentivise early reporting of potential breaches. These may, for example, take the

person wearing foo dog costume

Obligations of Energy Retailers Regarding Best Offer Information

Energy retailers in Victoria have specific obligations under the Energy Retail Code of Practice to provide clear information to customers about their ‘best offer’ – that is, the plan that would minimize the customer‘s energy costs based on their usage history. The objective is to ensure small customers can easily understand whether they are on the retailer‘s best plan for them and how to access the retailer‘s best offer if not. One of the significant challenges in the energy sector (as in banking and elsewhere) is that customers

low angle photo of sydney opera house australia

Guide to the National Energy Retail Rules

The National Energy Retail Rules (NERR) are a set of rules that govern the sale and supply of electricity and gas by retailers to consumers in Australia, alongside the related National Energy Retail Law (NERL). The NERR came into effect on 1 July 2012 in Tasmania, the Australian Capital Territory, and the Commonwealth. South Australia followed on 1 February 2013, New South Wales on 1 July 2013, and Queensland on 1 July 2015. The NERR do not yet apply in

Leave a Reply

Your email address will not be published. Required fields are marked *