What is RegTech and How Does it Help Me?

What is RegTech? How does it affect my business? What should I be doing?

According to Deloitte, "RegTech (Regulatory Technology) is more than a buzzword, it is a very real movement that is already having an impact on regulatory compliance."

Deborah Young, CEO of the RegTech Association explains what RegTech is, and how RegTech is used every day by businesses everywhere.

The RegTech Association is a global non-profit industry member body focused on accelerating adoption of RegTech solutions and creating a global centre of excellence.

The association brings together government, regulators, regulated entities, professional services and founder-led RegTech companies to ensure collaboration between all of the parties, promoting the RegTech industry as widely as possible, resulting in action in the uptake of RegTech proof of concepts and deployed RegTech solutions across the eco-system.

Membership of the RegTech Association has grown to180 organisations including 125 RegTech firms. The cohort also includes top tier banks, global technology companies and consulting firms. Deborah has advocated for the industry with Government, regulators, investors and trade agencies. She has led the recognition of Australia as the third highest concentration of RegTech producers in the world.

Deborah sits on the Australian Federal Government FinTech Advisory Committee, NSW Government ICT Procurement Task Force, The National Blockchain Roadmap RegTech Committee and is a member of ASIC’s Digital Committee and a regular speaker, presenter and designer of RegTech programs for the association and its partners and with regulators in Australia and overseas.

Deborah is an accomplished chief executive, non-executive director, mentor and strategic business consultant. She has over 20 years' experience as a senior executive across financial services, including investment banking, private equity, venture capital, superannuation and insurance spectrums. Deborah holds an Executive MBA (Global) from UTS Business School and was named as the Australian Financial Review’s 100 Women of Influence in 2019 for Innovation.

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Transcript

Podcast Episode 40: What is RegTech and How Does it Help Me?

Paul Sweeney (00:00):

Our guest today on The Business Behind Your Business is Deborah Young, and Deborah is the founding CEO of the RegTech Association, which is a global nonprofit industry member body focused on accelerating adoption of RegTech solutions and creating a global center of excellence. Since helping establish the association in 2017, Deborah has led the growth to over 180 organizations, including 125 regtech firms. And included in the association are top tier banks, global technology companies, consulting firms. And Deborah, in her role as the CEO of RegTech, has advocated for industry with government, regulators, investors, and trade agencies, and has led the recognition of Australia as the third highest concentration of regtech producers in the world, which is pretty exciting stuff. So Deborah, welcome to the podcast.

 
Deborah Young (00:53):

Thank you so much, Paul. I'm delighted to be here.

 
Paul Sweeney (00:56):

Well, we're quite privileged to have you here, because I'm looking at your bio here and you've got some pretty high level involvement. You're sitting on the Australian federal government FinTech advisory committee. You're on the New South Wales government ICT procurement taskforce, the National Blockchain Roadmap RegTech Committee, and you're a member of ASIC's Digital Committee and regular speaker and presenter of regtech programs worldwide. So we're privileged to have you here, so it's great that we can have this conversation.

Deborah Young (01:27):

Yeah, excellent. And this is what it's all about for me, is advocating for regtech, and so platforms like this are very valuable to us as an organization and to our stakeholders, that we advocate for regtech, educate around regtech, what is regtech, that kind of thing. So, thank you. I really appreciate this opportunity.

Paul Sweeney (01:51):

That's great. So we've mentioned the word regtech quite a bit already in opening. I guess before we start, we need to actually understand what regtech is. So would you mind explaining that?

Deborah Young (02:06):

Yeah, sure. So regtech, and I'll say that again, it's regtech, rather than reg tech. So it's not named after your Uncle Reg, but it's actually short for the word regulation. So regtech is short for regulatory technology, and it really is a family of technologies or emerging technologies that have been developed to improve the way businesses manage their regulation and compliance. So simply put, that's what it is. And underneath that, there's a whole range of different things and different solutions that it helps. It helps reduce some of the burden of regulation and compliance.

Paul Sweeney (02:49):

And businesses everywhere would be delighted to have less regulation and compliance, will make that easier in their day to day transactions. So can you tell us some ways that a business would actually use regtech or regtech solutions in their day-to-day operations?

Deborah Young (03:05):

Yeah. So I might start by saying regtech certainly streamlines regulation and compliance, but there are a whole of system benefits around regtech as well. And that includes that it builds more trust into the system, so that consumers connect with more confidence, people working within businesses have more powerful tools to surface and manage risks, and boards, of course, can have access to more accurate and timely information. And some of the ways that businesses might do that, it might be what's known as e-discovery. So that is where is your compliance and regulatory information right now, and how is it being shared, which is very salient at the moment with the pandemic and many people still working in a remote working environment. So where is your information and how is it being passed around? It might be as part of a digital identity or a stakeholder or customer identification process where regtech might be used.

Deborah Young (04:11):

Regtech might be used to surface money laundering and other financial crimes. It might be used for regulatory reporting. It might be used to check in on the conduct and culture of an organization. It could be used to manage workflows more effectively. It could be used to convert PDF documents into a digital format. It could be used to safeguard and secure data and other valuable information. It could also be used to analyze voice recordings, so very handy for things like call centers. It might be used to manage and monitor staff compliance, if you're part of a mandatory licensing regime. Now, obviously this doesn't come as all part of one solutions. That's a whole myriad of solutions that are commonly part of the regtech family. And I've probably missed a few out, but it is a very broad range of solutions that make up the regtech family.

Paul Sweeney (05:16):

And it's quite topical at the moment, as you mentioned, with the working from home and the COVID, so the questions that you raise of where is your data and who's got control of it and how is it being handled? But even the whole idea of how do we transact we've our regulations, our licensing bodies? Even just applying for trade licenses is a bit of a nightmare. And I know that in the recent budget, the government earmarked a large amount of spending to improve our digital transaction experience. So are we going to see any benefit of that in terms of how we transact with particularly government agencies?

Deborah Young (05:54):

Yes, I think that's a great question. And I've spent quite a lot of time over the last 12 months working on our relationships with government. So I think it is fair to say the government at all levels, that's state and federal, are alive to regtech very much so at the moment. I think 12 months ago, they were still struggling probably a little bit with what to do with it as it was nested under fintech for ease. But we've very much been speaking on a platform to say that regtech can not only benefit fintech, but it can benefit any regulated industry vertical.

Deborah Young (06:33):

And so this is why the government, right now, are very interested in regtech, because this can not only benefit the financial system, but also any other regulated industry. And of course, there are many such as agriculture, healthcare, telco, energy. Anything that is a regulated industry will have some kind of requirement for regtech, And so I think the government certainly have seen the benefits, not only from a policy-making perspective and also about driving Australian jobs and exports, but also how government can benefit from regtech within their own processes to actually streamline their own processes and make things much more efficient as they seek to reduce red tape and things like that. So I think government's certainly high on our agenda right now from government as a buyer, but also government as a policy maker and as an influencer.

Paul Sweeney (07:35):

So just interestingly, when you describe the government as a buyer, does that mean that there's opportunities for businesses to develop products to sell as part of this regulation environment?

Deborah Young (07:48):

Yes, absolutely. And in fact, as part of the last budget announcement, there was an $11.4 million amount of funding that has gone into a program called BRII, which stands for business research innovation. I've forgotten what the last I stands for. But what that is, is actually a program that the government are running to basically ask regtech companies to step forward across a range of different industries, and actually provide solutions to particular government challenges. And so that's across four different areas of industry. So not just financial services, but other areas as well. One of those, for example, is asbestos. So they're very much looking at how they can become a buyer. And it's very heartening to see that they've got such a program in place, and I'm hoping that there'll be follow on programs from that in the future.

Paul Sweeney (08:58):

So we've got the government as a buyer and perhaps maybe even small to medium business owners as supplies to that market. So can you sort of then unpack a bit more of the role of the RegTech Association in this process?

Deborah Young (09:16):

Yeah, so you said it actually in your introductory remarks. So basically, our association has committed to accelerating the adoption of regtech. So what that means is that we play a very important role in helping all parts of our ecosystem to collaborate more easily, which was really why the association was formed in the first place, because there was a fairly big dysfunction happening. It was very hard for software vendors to get the attention of the various financial institutions who were the main customer base to begin with. Very difficult to just speak to the right people about the right things, who had the right appetite and budget. And so what we've effectively done is created a community and we've been able to make the voice a bit louder and make the voice a bit more focused. And we've been able to do that in a very non-sales environment.

Deborah Young (10:09):

We've been very focused on problem statements. So, that is going to the problems that the industry are experiencing, and then we've been able to create programs that bring regulators, that bring the vendors, that bring the regulated entities themselves or the buyers, if you like, along on the journey and to look at the opportunity in a very safe place. And so this is one of the ways that we can accelerate adoption, by amplifying the voice and bringing everybody together. We run an education program as well. On my earlier comments, I've said that education right now is very important. So education and advocacy. We're also looking at expanding into new markets. And so you could read that as export markets, but it also could be just new verticals that could be potential buyers of regtech that haven't acknowledged regtech yet as something that could add value to them.

Deborah Young (11:06):

So there's quite a lot of opportunity there. And last but not least, what has been slow to date over the last four years is capital investment into the industry. And by that, I'm talking about private capital, so things like venture capital. There has been some angel investment, but probably around 60 to 70% of our founders have been backed by their own money. So they've been founder-led and they've been founded-backed. And clearly, we are trying to make a transition away from that so we can actually help these companies to grow to some scale.

Deborah Young (11:45):

So they're kind of the three things that we do. And we run a range of different activities and programs, mostly online at the moment, because of the pandemic. And we also run an annual conference, and we also have a big awards program that we run, and that will be run, we hope, this year towards the end of the year in a face-to-face way. So in short, it's really about bringing the industry together in bite sized chunks around things that they really care about. And the programs are very, very well attended right now in not just Australia, but to a global audience. And to demonstrate that, in 2019, we had 1,000 people attend our programs, and in 2020 we had 5,000 people attend the program. So it's been growing quite significantly and in particular during the pandemic.

Paul Sweeney (12:43):

So that has helped. And I know, having attended a number of those sessions as an observer, there's some amazing stuff being done in that regtech area. Would it be fair to say that fintech has been the more exciting industry and has had a lot more attention to date?

Deborah Young (13:02):

Yes, for sure. For sure. I mean, it's been recognized as an industry in its own right for a longer period of time. And financial services is obviously a very traditional and old industry, and the fintech technology has come in to create more competition and to disrupt some of the traditional banking model. And already, we're seeing some of the traditional banks actually really doing some fantastic things with some of the fintech technology that they've acquired or onboarded.

Deborah Young (13:42):

I think that in a lot of the government strategies, fintech has been around for a lot longer, so that's understandable. I think where regtech is concerned, most fintech should have probably a regtech overlay in their solutions somewhere, so they can actually be a buyer or a user of regtech as well. But I think regtech is certainly coming up the food chain, which we're happy to see. And I think that's largely because of the work of the association over the last four years. And whilst I still think that fintech is more widely recognized, part of what we're trying to do is educate around the benefits of regtech to try and even that up a little bit. And given that it does have applicability over other verticals, it does make it a very powerful range of solutions that can be of economic benefit to Australia and beyond.

Paul Sweeney (14:39):

Yeah. And look, we've already talked about how the budget's flagged investment in that industry and improving that digital experience. So we're getting to see more investment in the regtech area, but what else is on the horizon for regtech in Australia?

Deborah Young (14:57):

Well, I think there's still quite a lot of work for us to do. And you mentioned earlier that we are the third largest concentration of regtechs in the world in Australia, and we're using that positioning to really lead some global conversations. There is still much education work to do, particularly with government, so this will have a focus for us in the next 12 months. We'll also be spending quite a bit of time educating investors and, in fact, just this afternoon, I'm running our very first investor showcase event. We are having record numbers of investors coming to the association right now and asking about how they can connect in with the different technology companies, so those programs are driven to fast track that whole process. I think small business is still an underserved market when it comes to compliance and regulation, and it's incredibly difficult for small businesses to stay on top of what can be quite burdensome regulation and compliance requirements.

Deborah Young (16:03):

And so this is something that the association wants to look at in the future. We have been focused on the large end of town, but I think over time, we will start to look at how regtech could have some great benefits for small business. And we've begun to ramp up our programs across the board, our discussing of industry issues where we'll be taking a more frontline position on things, and then looking to our, we have a number of strategic alliance partners that we want to do more with over the next 12 months to drive more vital conversations. And obviously, participating in things like this is fantastic. So the call-out is if there's anybody out there listening that would like to learn more, I'd be delighted to come along and talk to your group or your community.

Paul Sweeney (16:53):

So you mentioned this, there's opportunities for small business as a buyer but also probably more as developers of technology, which can be sold to governments, but you also hinted, I guess, at export markets there, because we seem to be a leader in this space worldwide. Is that true?

Deborah Young (17:13):

Yes. Well, we're certainly looking to assess the current opportunities to actually understand in a very contemporary way. So this year we're doing a piece of research with the Department of Foreign Affairs and Trade for all of the APEC economies, and we're trying to map where regtech and fintech sits right now. So it's pretty exciting that later on this year that we'll be publishing an APEC paper, which is going to try and pinpoint where both fintech and regtech are up to, and actually showcasing what best practice looks like across those economies.

Deborah Young (17:58):

So it's a pretty exciting time, I think, for regtech, cause that could open up lots of opportunities. It could start conversations in places that we hadn't necessarily thought of to begin with. I mean, as Australians, I think we have gravitated towards English-speaking countries as our natural alliance partners, if you like, but there could be quite significant scale to be gained from other of the APEC nations that aren't necessarily English-speaking as their first language, but have significant scale and may not be the hub as we are of regtech solutions. So it's a great opportunity for Australia right now, I would say.

Paul Sweeney (18:41):

So if our listeners want to find out more about the regtech association or to become involved, what should they be doing?

Deborah Young (18:48):

Well, the first thing they can do is they can go to our website, which is www.regtech.org.au, and connect with us there via email or subscribe to our database. There's an add to mailing list link on there. 90% of our events are free for anybody to attend and open to anybody to attend. And then if you were interested in joining, there's information there on joining the association and the various different membership categories are listed on there, and that's all an online process as well. So the whole thing is online. But if you just want to make an inquiry, by all means, drop us an email. Or connect with us on LinkedIn, we have a company page under the RegTech Association, or you can connect with me directly via LinkedIn and I'll make sure that you're put into the system. So there's a number of different ways that you can get in touch with us and we'd love to hear from you.

Paul Sweeney (19:47):

That sounds great. And we'll put links to the website and those social media handles in the show notes for our listeners to follow up on it. And yeah, certainly having experienced some of the events that you've been running and I think it's an exciting time. And there's some amazing stuff being done by some of the members out there, so encourage people to check it out further. Jump online and have a closer look at what RegTech Association is actually doing.

Deborah Young (20:15):

That's fantastic, Paul. Thank you so much for the opportunity, and I look forward to hearing from your listeners in due course.

Paul Sweeney (20:23):

Fantastic. Thank you again, Deborah. I know you're extremely busy and doing an amazing job for regtechs in Australia, and we wish you all the success with the future work that you're doing for regtech.

Deborah Young (20:35):

Thanks very much, Paul.