FAQ

About RegTech

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What is RegTech?

RegTech is the use of new technologies to improve the efficiency and efficacy of regulatory compliance and oversight. In recent years RegTech has emerged as a promising solution for financial providers, with cascading benefits to consumers.

What is RegTech for Regulators?

RegTech for Regulators can be divided into two main areas:

  • The development and adoption of technology-enabled solutions for the collection, analysis, and usage of data by financial authorities to:
    1. Improve market oversight.
    2. Reduce compliance costs.
    3. Develop smarter, proportional, risk-based regulation.
    4. Increase consumer trust, financial well-being, and participation in the financial system.
  • The innovation of the processes through which financial authorities can:
    1. Develop and acquire technology solutions.
    2. Use these solutions to complement their supervisory capacity and build evidence to develop policies.
    3. Maintain and improve the vision and use of technology in the regulatory space.

What are the potential benefits of RegTech for Regulators?

Improving oversight of digital financial services and data analysis reinforces broader regulatory goals of developing inclusive and resilient financial systems. We expect that RegTech solutions will enable financial authorities to:

  • Improve market oversight by streamlining and standardizing the collection and analysis of supervisory data, thereby facilitating day-to-day monitoring and enhancing the capability of supervisors to effectively and efficiently oversee marketplaces.
  • Develop smarter, proportional, risk-based regulation by encouraging a timely, data-driven policymaking cycle that;
    1. Addresses bad practices and abuses before they become widespread.
    2. Informs policy design with evidence from market and customer experience.

Moreover, the adoption of RegTech for Regulators solutions may impact the following:

  • Financial services providers’ cost of compliance - RegTech solutions may lower both direct and indirect compliance costs stemming from delays or mistakes that result in penalties.
  • Consumer trust and participation in the financial system - RegTech solutions could strengthen consumer protection regulation by facilitating improved disclosure or customer recourse. This may bolster consumer confidence and trust in financial services providers, thereby encouraging consumers to increase their adoption and usage of financial products.

What are possible RegTech for Regulators applications?

Interviews with financial authorities have revealed several pain points and needs that RegTech for Regulators applications could address.

CONSUMER PROTECTION

  • What financial authorities have said: Currently, financial authorities have limited visibility of customer complaints and key consumer protection issues in their markets. Most consumer protection-related complaints are handled internally, and financial authorities typically are limited to analysis of aggregate information supplied by the providers themselves.
  • Possible RegTech for Regulators applications:
    1. Mechanisms for crowdsourcing Digital Financial Services (DFS) consumer experiences from transactions or complaints to allow the regulator to understand their experience and needs.
    2. Interactive technologies, such as chatbots, to “triage” incoming communication and direct consumers to their appropriate point of contact.
    3. Automated analysis of information available on the internet to proactively identify issues (e.g., natural language processing).

FRAUD AND AML/CFT

  • What financial authorities have said: Financial authorities face challenges with implementation of risk-based compliance systems for fraud and Anti-Money Laundering and Countering Financing of Terrorism (AML/CFT). Financial authorities have limited visibility over money laundering/terrorist financing risk, as they are reliant upon providers to identify and report suspicious transactions. Furthermore, the backlog of information and documentation to review creates challenges to investigate suspicious transactions or address the queries of other authorities in a timely manner.
  • Possible RegTech for Regulators applications:
    1. Machine learning to identify patterns among a wealth of data on transactions across various channels.
    2. Optical Character Recognition (OCR) and Natural language processing (NLP) to mine information.

DATA ANALYSIS

  • What financial authorities have said: Digital Financial Services (DFS) produce large quantities of data for regulatory analysis. However, collecting this information from numerous sources and synthesizing it into actionable insights remains challenging.
  • Possible RegTech for Regulators applications:
    1. Dashboards and other visualizations to allow for more up-to-date, customizable policy analysis.
    2. Tools for improving the timeliness and reliability of compliance reporting data (e.g., APIs), and for making them suitable for more complex analytics.
 

About the RegTech for Regulators Accelerator

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What is the RegTech for Regulators Accelerator (R2A)? What is it trying to achieve?

R2A’s vision is to help financial authorities accelerate the design and deployment of technology-enabled solutions for market oversight, data analysis, and policy development. In the long term, by mainstreaming RegTech for emerging market financial authorities, we expect to contribute to the creation of a global RegTech marketplace with robust RegTech solutions that have been demonstrated to meet financial authorities’ needs.

Specifically, the Accelerator will aim to achieve the following in its first 20 months:

  1. Financial authorities and innovators in two markets will have prototyped cutting-edge RegTech solutions.
  2. Participating financial authorities will have adopted innovative engagement processes to attract innovators and generate new solutions for market oversight and policy development.
  3. Innovators will have familiarized with financial authorities’ work streams, pain points, and requirements.
  4. Participating financial authorities will have played a leadership role in sharing learnings and good practices with peers.
  5. RegTech will be recognized as an important capacity-building tool for financial authorities.
  6. The foundations of the RegTech for Regulators marketplace will be built.

What financial authorities are partnering with R2A?

In its first 20 months, R2A is partnering with two leading emerging market financial authorities to prototype RegTech solutions:

Based upon the outcome of the first 20 months, the Accelerator may expand the scope of engagement to include a broader set of financial authorities.

Who are the supporters behind R2A?

The Bill & Melinda Gates Foundation, Omidyar Network, and U.S. Agency for International Development have joined together to establish the RegTech for Regulators Accelerator with the aim of addressing information and capacity gaps that hinder emerging market financial authorities. All three organizations bring a shared commitment, extensive expertise, and resources to support financial authorities as they work to develop inclusive financial systems.

Who runs R2A?

R2A is a project managed by BFA and fiscally sponsored by Rockefeller Philanthropy Advisors. Both implementing partners bring deep global expertise in policy development, technology, and data literacy.

What is the timeline for R2A’s work?

R2A seeks to develop and test RegTech prototypes through a 20-month engagement. Key phases of this partnership include:

  1. Initial analysis to understand the financial authority’s key needs and identify a priority use case.
  2. Selection of an innovator/vendor that will partner with the financial authority to prototype the solution.
  3. Design, development, and testing of a RegTech prototype.

Upon completing the 20-month engagement, partnering financial authorities will decide whether to roll out the tested solution.

What are the R2A focus countries and partner financial authorities?

Initially, R2A will work closely with a small set of emerging-market financial authorities to identify a use case and develop and test a prototype RegTech solution. Financial authorities from Mexico and Philippines have already joined the initiative.

Based upon the outcome of the first 20 months, the Accelerator may expand the scope of engagement to include a broader set of financial authorities and/or a broader set of supervisory issues. In addition, R2A may take a more active role in driving global RegTech into the mainstream.