RegTech and Blockchain: How do both technologies coincide?
What if one day you wake up to self-driving cars, machine -led banks, robot-operated restaurants and drone-delivered online shopping? Welcome to the Fourth Industrial Revolution! Automation and artificial intelligence are changing agents in the fourth industrial revolution as this evolvement from third to fourth industrial revolution causes jobs to be redundant. These jobs are then replaced with machines that would do the job cheaper. Positions such as bookkeeping clerks, team assemblers, and customer service representatives are a few to start with.
As we approach our days ahead in automation and robotics, we would have to face the fact that sooner or later technology will seemingly outgrow human skills and talents and when this happens human interaction in jobs will slowly deteriorate.
Blockchain for that matter is highly known as a disruptor in technology. Why? This is mainly because blockchain would serve as a technology that helps reduce redundancy in work flows while increasing efficiency and bringing costs down. This technology is set to blossom making tidal waves across industries. Blockchain is a distributed database that holds records of digital data or events in a way that makes them tamper-resistant. While many users may access, inspect, or add to the data, they may not be able to delete it. The original information stays put, leaving a permanent and public information trail (Investopedia). As blockchain is well known for its transparency, immutability and incorruptibility, it’s no wonder that industries such as healthcare, supply chain, insurance, energy and many more are jumping on the bandwagon to adopt it.
On this note besides blockchain, Regulation Technology (RegTech) may seem like a complicated buzzword but in essence it is a standard that is developed by FinTech companies especially financial institutions to have a seamless process of doing business. Due to the many compliance factors which financial institutions have to comply with (Basel III, Dodd-Frank Act, AML, KYC laws, etc) it may not be easy to adopt a new technology but RegTech redefines it. According to Deloitte,” RegTech seeks to provide nimble, configurable, reliable, secure, cost-effective and enhanced opportunities for revenue growth”.
RegTech provides support throughout the Onboarding, Monitoring, Detection, and Reporting stages. This process flow resembles a similar strategy that is used in Supply Chain Management where blockchain is concerned. Under RegTech, the Onboarding process relates to signing up of new customers, Monitoring looks at records, thresholds, regulations, market trends, etc. Detection covers tools to ensure fraud is not committed while funds received are not laundered money. Reporting suggests compliance requirements, regulatory information and various other reporting activities.
As supply chain utilizes blockchain throughout its process, it involves recording, tracking, assigning, linking and sharing. The process involves document record and tracking which is somewhat similar to the RegTech process of monitoring where every product that moves in the supply chain through different intermediaries is recorded in the blockchain ledger. Assigning and Linking on the other hand relates to RegTech process of detection. It involves verifying certifications of certain products to differentiate between the fair trade and the organic ones. Products are traced using serial numbers, bar codes and digital tags which arethen stored on the cloud or blockchain ledger while ensuring document safekeeping at the same time avoiding issues such as “inside jobs” or fraud.
On the other hand, the sharing process in the supply chain relates to RegTech’s process of reporting. How this works is that all information that is transferred from one party to another through the supply chain is stored on the blockchain. This allows for users or departments involved to cross-check information or data that is stored. This process mirrors the reporting standards as to how it’s done in RegTech where every process is tracked and reported in accordance with compliance guidelines, regulatory information and so on. The sharing process in the supply chain and reporting process through RegTech helps curb corruption while ensuring trust and mutual benefits are gained between all parties involved.
As we approach an era with constant developments in technology, we at Chaintope strongly believe that blockchain is a technology that would enhance processes, reduce cost and limit bureaucracy especially in government departments and regulatory processes. Although the technology is still at its infancy stage and regulators are being tight lipped on it till a framework is established, we foresee exponential growth and strongly believe many would start adopting it sooner or later due to its robustness, traceability and immutability. We are happy to be creating a social structure that would transform lives and businesses while bringing a better future to the world.
