By: James Claude.
Published on: Business Live.
Regulatory technology can better detect fraudulent activity, connect regulators and businesses, and protect consumers.
South Africa is no stranger to the growing worldwide problem of cybercrime; the recent cyberattack on Transnet, the state-owned ports and rail operator, is a testament to this.
Since the start of the Covid-19 pandemic cyberattacks have risen sharply here and abroad, and Cybersecurity Ventures predicts cybercrime will cost the world more than $6-trillion annually by 2021.
Though cybercrime affects multiple sectors, the digitisation of financial transactions has led to a marked rise in fraudulent activities in the telecommunications and financial sectors. TransUnion’s 2021 Global Consumer Pulse study found that 37% of SA consumers have been targeted by Covid-19 related digital fraud. Moreover, suspected fraudulent digital transaction attempts against businesses that originated in SA increased 43.62% over the past three years. The financial services sector experienced a 114.68% increase in fraud, mostly identity theft, while that for the telecommunications sector rose 46.26%, mostly credit card fraud.
The recent Cybercrimes Act, combined with the Protection of Personal Information Act that came into effect in June, is an excellent first step for SA to tackle cybercrime. However, these regulations cannot be the only mechanisms; regulators and businesses need to design and implement technology-based systems that detect and manage fraudulent activities. Though relatively new, regulatory technology (RegTech) has gained prominence not only because it can detect fraudulent activity; it can also connect regulators and businesses while protecting the interests of consumers.
According to research, the global RegTech market was valued at $2.87bn in 2018 and is expected to grow at a compound annual growth rate of 52.8% between 2019 and 2025. According to Deloitte, RegTech promises to disrupt the regulatory landscape by meeting the ever-increasing demand for cybersecurity and regulatory compliance.
SA has a growing number of RegTech start-ups. Several African countries have already implemented, or are implementing, digital systems to monitor national and international telecommunications traffic and financial transactions to support revenue assurance, combat network fraud and cybercrime, and enforce billing integrity.
Guinea has introduced a RegTech platform to boost its financial services sector, increasing financial inclusion. The Autorité de Régulation des Postes et Télécommunications, the country’s telecommunications regulator, says the digital tools it implemented go much further. “The technology covers all aspects of the mobile and digital ecosystem that are likely to affect the Guinean subscribers, who must be protected by an effective regulatory framework,” it said.
RegTech also provides benefits beyond mitigating the risks posed by cybercrime. Rwanda demonstrated this with its response to the Covid-19 pandemic; the central bank instituted a series of rapid economic policy changes to support businesses and consumers affected by lockdowns, and to further the country’s national agenda. The Rwanda Utility Regulatory Agency has used RegTech since 2012 and supported the central bank with its ability to rapidly analyse mobile money transaction data during the lockdown period, track the response to these new policies and identify trends and insights for policymakers.
NextBillion, the spatial data platform, notes that Rwanda’s ability to apply analytics to the usage of digital financial services by gender, age group, location, or other demographic factors provides timely evidence of how different segments of the population are responding, and who is being excluded. That allows for evidence-based policy-making, which can be leveraged for the benefit of business and consumers.
RegTech is a powerful tool for SA regulators and businesses because it delivers real benefits in terms of efficiency, productivity, and reactivity. For regulators, the ability to capture data flows relating to certain types of transactions instantly and at the source, dramatically improves revenue assurance, counters fraud, and enforces compliance. Equally, RegTech allows businesses to remain compliant and protect their customers against cybercrime while speeding up processes that lower costs and allow for the adoption of new and affordable products and services.