The world today is increasingly complex and our lives increasingly digital. In a global economy, human activity -- goods and services -- move across national borders. In this environment, legal compliance has grown in volume and complexity.

Moreover, the regulatory context is constantly changing with liability ever more likely to extend to personal responsibility, in addition to corporate. Aggressive regulatory agencies and new procedures such as class actions are making the cost of non-compliance ever more prohibitive.

This new environment has seen greater attention by regulators and those regulated to use technology to monitor compliance. "RegTech" is the blended term that describes the use of technologies to deliver regulatory requirements.

It involves using technology to better deliver value in relation to reporting, monitoring, providing analytics and fulfilling auditing requirements. Compliance is thus able to be achieved more efficiently, more effectively and with greater transparency. It is superior to traditional systems that have been, and largely remain, paper based, bureaucratically centered, transaction-focused, and involving many intermediaries in the regulatory chain.

Although RegTech initially focuses on the banking and finance industries, its application is rapidly expanding to many other areas, such as stock markets, debt collection, health and insurance.

Included among the growing "tool-set" of RegTech are: data warehouses able to engage in big data analytics, for example to spot gaps in regulation and areas of high risk for non-compliance; checking/auditing tools that eventually may be able to audit 100 percent of transactions; automation tools that can reduce or eliminate the many intermediaries that present opportunities for fraud and corruption; transaction reporting, information management tools, enhanced regulatory reporting, training packages, case management tools and more.

This has benefited from the growth of e-government, business-to-business and e-commerce, under which organizations have more touch points across multiple media, with multiple channels. Organizations are required to be more citizen- and customer-focused.

Another feature of much of RegTech is that related technology advances are often more likely to be undertaken by more nimble start-ups. This is because bureaucratic entities are often laden down with restrictions, less adaptive and less flexible than outside entities.

In order to maximize the potential, continuing legal reform is required, especially in developing uniform standards. We need a type of "legal lego" in order for innovative applications to use these bricks to build the systems architecture required for a 21st Century Information Age.

International and industry-specific organizations such as APEC, UNCITRAL, UNIDROIT, standard setting bodies and many others all play a role in this process. As they make progress in e-government, nations will also need to focus more on re-design of the whole regulatory value chain.

As RegTech gains momentum, governments and industry will have to focus on adding value to the consumer and providing better consumer protection. In China, the Shanghai Futures Exchange in 2016 introduced SMARTS, a market surveillance platform adopted as Nasdaq's flagship surveillance solution. In May of this year, the People's Bank of China (PBOC) announced the creation of a FinTech committee under its supervision charged with monitoring the impact of RegTech and FinTech and ensuring coordinated growth.

Indeed, just as China has become a world leader in infrastructure, RegTech and FinTech represent opportunities for it to be the leader in this area of future growth and development thereby enhancing its economic competitiveness.

Another strategy being used in the U.S., Australia, Canada, and U.K., is the creation of a regulatory "sandbox" in which startups have a safe space to develop, test and pilot new RegTech applications. In the U.K., for example, the Financial Conduct Authority has initiated an industry sandbox providing a space for continuous dialogue, idea generation, testing, and feedback between FinTech entities, key stakeholders, regulators, and regulation technology (RegTech) groups.

The Australian Securities and Investments Commission (ASIC) is engaged in consultation on how to establish best practices and guiding principles for an national RegTech eco-system

Governments also need to enhance innovation in regulation and compliance. The Indian government has pushed for RegTech through its Startup India and Digital India Initiatives. Late last year, the Singapore Stock Exchange collaborated with two firms to develop applications to detect market misconduct and search for ways to promote good market practices and a fair, open and competitive market.

The technology industry and governments must also do a better job of partnering. In the past, many technology companies have tended to view regulation as a barrier. With the advent of RegTech, companies and governments are increasingly seeing it as an opportunity.

The RegTech industry is also getting itself organized. Evidence of rapid growth is the formation of the International RegTech Association (IRTA). IRTA exists to ease and accelerate the evolution of RegTech by promoting innovation and facilitating integration and collaboration globally.

Finally, academics, working across multiple disciplines, should also be proactive in the RegTech process as by helping to develop, evaluate, design and re-design new regulatory theories and models.

Eugene Clark is a columnist with China.org.cn. For more information please visit:

http://www.ccgp-fushun.com/opinion/eugeneclark.htm

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