In conjunction with the Regulatory Technology Symposium, the Saudi Communications and Information Technology Commission (CITC) published a whitepaper titled “RegTech: The Future of Regulatory Landscape.” The paper aims to shed light on regulatory technology, trace the evolution of RegTech to its current state, and highlight its essential roles in managing governance, risk, and compliance. In doing so, the CITC also highlights how utilizing emerging and advanced technologies improves regulatory and supervisory performance, contributes to compliance, alleviates regulatory burdens, and increases operational efficiency.
What is RegTech?
While various stakeholders have provided several definitions of RegTech, no common definition is widely endorsed. However, it is clear from most reports that RegTech is viewed as a set of solutions aimed at leveraging new technologies to automate regulatory processes and increase compliance. In addition, RegTech is defined as the application of advanced and emerging technologies to solve specific issues/objectives and enhance monitoring and regulatory compliance of regulated entities and regulators in any sector.
While emerging technologies have significantly changed the world and its various sectors, making services more accessible, transforming processes into highly automated operations, and considerably enhancing productivity and efficiency, RegTech is expected to provide extended impact through these emerging technologies.
According to the CITC, the most relevant benefits of RegTech are greater accuracy, speed, and data optimization compared to legacy systems. Additionally, RegTech can provide businesses with more than 600% return on investment with a payback period of fewer than three years, which points to the considerable transformation potential that RegTech brings to the business landscape.
Therefore, CITC underlines that the proper adoption of RegTech solutions as regulatory tools will help in several perspectives, including governance, timesaving, risk management, analytics, cost efficiency, customer/employee experiences, regulatory fines, and compliance.
RegTech Applications in Various Sectors
The journey of RegTech implicitly describes the evolution of how RegTech has been applied over the years. In its initial years, RegTech was used primarily by regulated entities in response to the progressively complex regulatory requirements and the resultant mounting compliance costs and non-compliance fines. RegTech solutions were aimed at surmounting compliance challenges faced by institutions. However, in recent years, buoyed by the benefits RegTech brought to regulated entities, regulators have begun to apply RegTech to their regulatory and supervisory functions and benefit from its operational efficiencies in their processes.
According to the whitepaper, irrespective of the sector, RegTech finds applications across some specific regulatory objectives. These include but are not limited to the following:
– Registration: applying RegTech to manage the registration of new businesses and organizations.
– Licensing: using RegTech to manage the licensing aspects of businesses, organizations, and their employees.
– Monitoring: utilizing RegTech for surveillance to gather information about the conduct and market dynamics.
– Compliance: applying RegTech to analyze the consolidated data to ensure compliance and identify non-compliance with the sector’s regulations.
– Regulatory Analysis: applying RegTech to better understand, monitor, track and manage the different regulations that affect the organization across multiple jurisdictions.
Global RegTech Market
Much of RegTech development is geographically centered in North America, the UK, and Europe, making up approximately 85% of the global RegTech market. It is expected for developed economies to be the flag-bearers for RegTech, given the increasing regulatory stringency, expanded state of technology, and availability of monies to prioritize RegTech development.
With the global RegTech market reared for significant growth in the coming years, Saudi Arabia’s market is also beginning to take form. As part of its critical strategic objectives, the CITC in Saudi Arabia is leading a national effort to utilize RegTech. With the proposed blockchain-based system, CITC aims to improve efficiency, reduce the length of tag name registration, and provide better customer satisfaction.
Catalyzing RegTech in Saudi Arabia
For RegTech to flourish, its entire ecosystem must be mobilized. Regulators and government agencies are in the unique position of directly exerting influence over many of the enablers in the ecosystem, which in turn can stimulate the core components and boost the demand for and supply of RegTech in the ecosystem.
For Enhancing ‘Regulatory Functions’ to catalyze RegTech, CITC introduces the following initiatives:
- Promoting ‘Funding’.
- Encouraging ‘Associations’.
- Fostering ‘talent’ development.
- Designing ‘assets’ to propel RegTech.
- Developing a market accessibility program to facilitate the implementation of RegTech solutions.
- Building knowledge repositories and defining avenues for partnership with regulators to provide RegTech providers seeking to enter the market with access to domestic regulatory knowledge.
- Designing a pilot RegTech project to be run in tandem with legacy systems for the two-fold benefit of strengthening regulatory compliance while introducing regulated entities to the benefits of RegTech.
Encouraging the development and adoption of RegTech inadvertently encourages research and use of advanced technology such as artificial intelligence, machine learning, natural language processing, distributed ledger technology, and robotic process automation, among others. This is in addition to the core benefits RegTech offers, from ensuring integrity and compliance across all market operations to contributing to customer protection.
In conclusion, the whitepaper signals CITC’s keenness to ramp up investments in developing the RegTech ecosystem, particularly in industries such as ICT, where the use of RegTech is rudimentary. As the market has begun to diversify, it would be advantageous for Saudi Arabia to build preeminence in RegTech for ICT, making the Kingdom home to technological and regulatory innovations.
If you are interested in learning more about CITC’s whitepaper, Saudi Arabia’s regulatory landscape, or require support in engaging the regulator, please contact Hussein Abul-Enein at firstname.lastname@example.org or Rati Kvantaliani at email@example.com.