African Tech Voices: Regtech, a critical ally for governments amid rapid digitalisation
The increased digitisation of key markets like mobile telecommunications and financial services, among others, certainly has driven growth, especially since the start of the Covid-19 pandemic. But ensuring the efficiency and compliance of digital services requires a digital approach to regulation, which regtech enables.
The digital transformation that is currently reshaping African business and societies gives the continent’s governments many good reasons to turn to regtech solutions to support their regulation efforts. Here are four of them.
To curb the rise of fraud in the telecom ecosystems
The growth of the African telecommunications sector has been matched by that of telecom fraud, especially cybercrime. At the start of 2021, Africa Tech had forecast that, due to telecom fraud, the continent would experience financial losses of up to US$5-billion at the end of the same year, or 1 billion more compared to 2020, if nothing was done. This begs the following question: What can be done?
Some East African telecom regulators have been exploring the benefits of regulatory technology, or regtech, to counteract fraud. The Communications Authority of Kenya, for instance, initiated consultations with the industry in 2020 to determine the best way to implement the Device Management System, a solution that aims to identify counterfeit, stolen and non-type-approved devices and stop them from connecting to the country’s telecom networks. Furthermore, according to News Africa, Rwanda and Tanzania have seen their level of telecom fraud drop following the implementation of a regtech solution provided by GVG, which includes a fraud management system.
This solution contributed to enabling the Tanzanian government to collect 40 million USD in additional revenue in five years.
To improve the oversight of growing digital financial markets
According to KPMG, 2021 was a record year in terms of Fintech investment in Africa and this trend is likely to intensify. Indeed, in the first eight months of 2021, African Fintech start-ups raised more than the combined amount for 2019 and 2020, the GSMA reported. On the continent, Nigeria, Kenya and South Africa are key markets. Kenya, more specifically, has emerged has a Fintech innovation hotbed.
The development of Fintech has brought about numerous benefits, one of the most important being the promotion of financial inclusion. However, it has also made the market more vulnerable to fraud. Even before the pandemic accelerated the pace of Fintech development, the IMF recommended, in its 2019 report entitled Fintech in Sub-Saharan African Countries, that the benefits and risks associated with Fintech growth be respectively leveraged and mitigated through suitable regulatory frameworks. These frameworks can then be used as a solid base to support the benefits of regtech when it comes to ensuring compliance in the African digital financial markets.
To meet the increasing need for e-governments and help expand digital identities
The pandemic years have caused an intensification of the African governments’ efforts to enhance their e-government capabilities. This has led to a significant decrease in the number of UN member states in Africa that have a low e-government development index (EGDI), from 26 in 2016 to only seven in 2020, according to AllAfrica. Rwanda’s Irembo platform, for instance, is a web portal which offers 85 government services to Rwandan citizens via the Internet, and will offer many more in the near future, says the NEC.
To be truly inclusive, however, the development of e-government services implies a similar development of digital identities, which is still a work in progress in Africa. It also requires its own regulation, not only to ensure service compliance, but also to validate the users’ digital identity, as well as guarantee the security of the personal data the users provide upon onboarding.
To harness the growing potential of mobility intelligence
At the start of the pandemic, mobility intelligence solutions were designed to help control population movements and ensure that everyone was respecting the lockdown and isolation requirements. Since then, it has become apparent that mobility intelligence could offer numerous other benefits to governments, by providing the latter with valuable data allowing for predictive analysis on mobility trends, for a broad range of purposes such as policy planning, geofencing, migratory trend analysis and crisis management, among many others.
However, governments making use of mobility intelligence solutions have the responsibility to ensure not only the security of the collected data, in compliance with the national privacy laws, but also that these solutions are used solely for the purpose of supporting governments’ strategic planning. The implementation of effective regtech solutions would help governments fulfill this critical mandate, build the citizens’ trust and thus fully leverage the potential of mobility intelligence.
In summary, the digital transformation of key markets implies a digital approach to their governance and regulation as well. Enhancing and streamlining regulatory and compliance processes is exactly what regtech is all about. Regtech therefore represents a strong ally for governments and regulatory bodies when it comes to regulating digitized key markets.