With the world’s “structural uncertainty” looming large, efficiency, accountability, and effective collaboration in regulatory systems have never been more critical. That’s according to the World Economic Forum.

“The 21st century poses new challenges as regulatory systems struggle to keep up with the risks and opportunities of emerging technologies,” says the organisation.

“It is important to recognise the challenges of balancing the need to innovate and the duty to protect and build trust among stakeholders.

“Often, law and bureaucracy are hard to reconcile with technological change. As a result, regulation can hinder new ideas, products, and business models.

“Industries and corporations in different verticals struggle with ambiguous, static, or non-existent regulatory frameworks. Moreover, technologies transcend traditional industry definitions, straddling sectors and jurisdictions.”

Accordingly, the WEF has focused on regulatory technology (RegTech) in a new report, Regulatory Technology for the 21st Century, produced in collaboration with the Global Future Council on Agile Governance.

The WEF predicts that the RegTech market will grow in value from $7.6 billion worldwide last year to $19.5 billion by 2026 (a compound annual growth rate of nearly 21 percent).

The technology marks a shift from “reactive to dynamic regulation”, with an increasing focus on trust, open access, and agility, it says.

Using RegTech, organisations can free up social capital for reinvestment. Plus, effective deployment builds “greater capacity to pre-empt changes in regulated markets, simplifies complex systems, and quickly updates [sic] based on regulatory change.”

However, even better returns come from the joint adoption of RegTech and agile governance, says the report. “This increases the system flexibility to adjust underlying regulatory measures, as opposed to overhauling or creating new processes.”

RegTech can help ‘connect the dots’ more quickly, automate tasks, and translate complex regulation into code, it adds.

“Applying technologies, like AI, blockchain, and cloud, responsibly to augment the ability of compliance teams can help both the regulated and the regulator to do their job more effectively and collaboratively.”

However, three success factors are critical to achieving positive outcomes, says the report.

First, regulators must embrace new engagement and collaboration models to power more innovative and agile regulatory processes and outcomes. “Collaboration holds the keys to a more innovative, RegTech-driven future,” says the WEF.

Second, new design models that offer “transformative toolkits for regulatory bodies” embrace the idea of “radical user centricity, a practice area most frequently applied to product and service design”.

In other words, embrace a dynamic approach that welcomes experimentation and iteration, explains the report.

Finally, new applications and platforms will give human regulators new “superpowers” to ingest large volumes of data and make better, more evidence-based decisions.

“The power of regulation as a platform cannot be overstated, it is a transformation of regulation into a form of digital logic, or codable regulation, accessible to technology developers and overseen by government regulators.”