Moving Toward an Era of RegTech

The adoption of technology by regulators—RegTech—has the potential to improve how regulators operate and how easily and effectively those they regulate can comply with regulations. RegTech includes a variety of digital tools, such as: workflow systems that help improve the timeliness and consistency of licensing, permitting, and investigations; remote sensing tools that can identify regulatory non-compliance, such as drones and satellite imagery; smartphone apps that help individuals and businesses with regulatory compliance; and artificial intelligence that draws insights from large data sets.

There have been many exciting case studies of these new technologies and their uses by regulators, including from the Administrative Conference of the United States, the American Civil Liberties Union, the Australian Productivity Commission, and the Australian Communications and Media Authority. But how extensively do regulators deploy these technologies?

This question was the focus of a survey conducted earlier this year of Australian and New Zealand regulators by Objective Corporation, an Australian-based RegTech firm. The report focused on the adoption of 29 technologies by regulators and provides a snapshot of the benefits that various regulators seek from RegTech, the barriers they encounter, and the level of deployment across a range of different technologies.

The survey highlighted that many regulators are at the planning stage for deploying technologies, rather than at the stage of fully deploying them. Most, but not all, Australian and New Zealand regulators’ uses of technology are just scratching the surface.

The adoption of technology to transform permitting and licensing regulatory functions, for example, still has a long way to go. Web-based portals or mobile apps for permitting are highly relevant for most regulators, and 25 percent of regulators reported that they had fully deployed these technologies. Even more promisingly, 70 percent are planning, considering, trying, or partially deploying these systems. Chatbots are automated tools that can also help regulated entities find information and comply with regulations, but they raise lots of policy issues and are currently only deployed by three percent of regulators.

A common complaint by individuals and businesses is that they cannot track the progress of their permit and licensing applications. Expectations are higher when Amazon enables tracking for parcels from Shenzhen to San Francisco. At this stage, only 14 percent of regulators reported that they had fully deployed systems that allow applicants to track approval progress.

And although 90 percent of regulators consider an integrated licensing and investigation system relevant to their agencies, currently only 18 percent have a single view of each regulated entity. A higher proportion of regulators—38 percent—have fully deployed systems that allow complainants to submit allegations and incidents directly on websites, while only seven percent provide the option of using mobile device apps.

The survey suggests that about 70 percent of regulators that do inspections do not use tablets or laptop computers to capture information for inspections. Respondents indicated that 30 percent have fully deployed the tablet or laptop capability, 38 percent are testing or partially deploying this solution, and 22 percent are planning or considering its implementation.

Almost every respondent considered data sharing across agencies and jurisdictions as relevant to their activities. Sharing data can help trigger voluntary compliance and inform enforcement activity. But data sharing also raises important policy and privacy issues. Based on the survey, only 14 percent of regulators have fully deployed systems to share data across agencies.

Because regulators increasingly need to manage large and complex data sets, artificial intelligence is highly relevant. This technology promises to draw significant insights by analyzing audio, images, video, and documents. But currently only two percent of the surveyed regulators have fully deployed these emerging technologies.

For citizens across Australia and New Zealand, COVID-19 led each state and territory within New Zealand to implement apps for mobile devices that allowed citizens to display their vaccination certificate when entering buildings and to check in using QR codes to help with contract tracing, as did many other countries. But progress with allowing citizens to display their various licenses on mobile devices has been slower; only 10 percent of regulators with licensing requirements currently offer this technology.

New Zealand and Australian governments at national, state and territory, and local levels have made it a priority to improve their use of digital tools as outlined in whole-of-government strategies, as have those in other countries. Currently only one third of the regulatory officials who responded, however, were aware of the existence of a documented digital strategy within their agencies to guide how they can better use technology to achieve their regulatory objectives.

So, what is holding back progress?

Regulators need to be smart buyers and smart implementers. But more than two thirds of respondents say that inadequate technology capacities and capabilities are a barrier, along with the perennial issue of funding shortfalls.

Lack of awareness of market offerings was also frequently cited as a barrier, but this is where industry or sector groups such as the United States’ National Association of State Chief Information Officers, the non-profit RegTech Association, the Government Regulatory Practice Initiative in New Zealand, and Australia’s National Regulators Community of Practice have a role to play.

As the survey demonstrated, across Australia and New Zealand, regulators’ use of technology is just scratching the surface. But what of elsewhere in the world? United Kingdom regulators currently have the opportunity to participate in a similar survey, with results to be published in the new year.

Regulators should recognize that there are benefits from increased adoption of various forms of RegTech—for both the regulator seeking to achieve better outcomes and for regulated entities seeking easier ways to comply. And in seeking to embrace more sophisticated, risk-based, intelligence-led approaches, regulators need to have the foundational technology systems to collect, collate and analyze information.

Many regulators have started to deploy various digital technologies. But many more are only at the earliest stages of trying out some of these tools—or are just considering implementing them. The recent survey by Objective Corporation highlights the opportunities ahead and suggests an appetite for greater collaboration on the use of RegTech throughout different regulatory domains.