The Role of RegTech in Oversight and Compliance

Regulatory Technology, or RegTech for short has evolved significantly over the years, driven by a dire need for efficient and effective solutions to navigate the complex and ever-changing regulatory landscape.

This innovative field combines the power of technology and regulatory compliance to streamline financial processes, enhance transparency, and mitigate risks. The evolution of RegTech in Africa has been shaped by the unique challenges and opportunities faced by the region.

The Birth of RegTech

One of the primary areas where RegTech made an early impact was regulatory reporting and data management. Traditional reporting processes were often time-consuming, error-prone, and resource-intensive. RegTech solutions introduced automation, advanced analytics, and data visualization tools to simplify and accelerate reporting, ensuring accurate and timely submission of regulatory data.

James Claude, the CEO of Global Voice Group, who is a regulatory technology developer working with governments across Africa since 1998, says that the late 80s and early 90s was when telecommunication companies became the backbone of many services, long before the term RegTech was ever coined.

Global Voice Group started supporting the telecom regulators and other Government agencies in their mandate to monitor compliance in their respective sectors, through the use of digital technologies. This happened as a result of the liberalization of the telecom market.

“The initial stage of RegTech involved the development of specialized software solutions to automate compliance tasks, improve data management, and facilitate reporting. Recognizing the need for localized solutions, RegTech providers began tailoring their offerings to meet the specific compliance requirements of African countries, taking into account cultural nuances, languages, and regulatory frameworks,” Claude remarks.

RegTech’s initial focus in Africa was on improving regulatory reporting processes and enhancing financial inclusion. RegTech solutions helped financial institutions and regulatory bodies automate data collection, analysis, and reporting, ensuring compliance with regulatory requirements in a more efficient and cost-effective manner.

RegTech’s Impact on Risk Management and Fraud Detection

As financial crimes and fraud posed significant challenges to Africa’s financial systems, RegTech solutions evolved to address risk management and fraud detection. Big Data analytics, machine learning, and artificial intelligence were integrated into RegTech platforms, enabling real-time monitoring and identification of suspicious activities. These technologies empowered regulators and financial institutions to proactively detect and mitigate risks, enhancing the stability and integrity of the financial ecosystem.

A prime example can be found in Rwanda where the regulator, the Rwanda Utilities Regulatory Authority (RURA), utilized RegTech to combat fraud and boost revenue generated by international calls. By implementing RegTech solutions, RURA witnessed a significant 122% increase in international traffic revenue within the first year. Over ten years, the regulator’s revenue from ICT increased by an impressive 250% through the integration of complementary RegTech solutions.

On working with governments in Africa, Mr. Claude adds that, “together with The Ghana Revenue Authority (GRA) and the National Communications Authority (NCA), we have implemented RegTech to boost revenue collection and compliance in the telecom sector. Through the adoption of RegTech, Ghana saw a 36% increase in revenue from 2021 to 2022. Additionally, taxes paid by the telecom industry rose by 18% in 2021 compared to 2020, further strengthening compliance and financial governance. This is an excellent depiction of the impact of RegTech for African countries”.

The Future of RegTech in Africa

The future of RegTech in Africa holds immense potential for further advancements. Breakthroughs can be expected in key areas, including data privacy and protection; regulatory standardization; cloud computing and infrastructure; and regulatory technology building and capacity building.

RegTech will play a pivotal role in helping organizations comply with evolving data protection regulations, ensuring the responsible handling and secure storage of customer data. Additionally, when it comes to regulatory standardization, efforts will be made to harmonize regulatory frameworks across African countries, enabling interoperability and facilitating seamless compliance processes.

To fully leverage the potential of RegTech, there will be a focus on education and capacity building programs. Training initiatives will equip regulatory professionals, compliance officers, and industry stakeholders with the necessary skills to effectively implement and utilize RegTech solutions.