The disruption from the COVID-19 pandemic is prompting a fresh wave of digital transformation among regulated organizations in Australia, according to a leading analyst from KPMG.
Will Liang, the firm’s director for data and RegTech, told a webinar last week that many regulated Australian entities — particularly those in the financial sector — had slowed the pace of their transformation because of the recent Royal Commission enquiries. But they were now refocusing due to COVID-19.
“I think there will be a tsunami of activity across industry, and it will happen simultaneously,” Liang told the webinar titled ‘Digital Transformation in a COVID-19 world’ and organized by the RegTech Association.
5 pandemic triggers
Liang outlined five main triggers for the renewed focus:
Business continuity and resilience. All existing plans, he said, were “out of date and need to be redone.” For many businesses their business continuity requirements would see them “relentlessly digitize their operations,” Liang said. He said he had had many conversations with Board level representatives from leading companies, with many of them talking about “how can we use RegTech to digitize our risk and audit function, our data function.”
Customer behavior. Many industries, said Liang, had “changed forever” because of COVID-19 and he gave the example of the travel industry which was facing limited international travel until 2023. Other examples were in the retail industry, where the use of cash had collapsed, while the large number of workers who would continue to work from home post COVID-19 would impact the real estate industry. “There will be competition and there will be winners and losers, and the key to success will be digital transformation,” Liang said.
Moving away from globalization. There would be a renewed focus around local businesses as consumers rediscover loyalty, and source goods and services closer to home. “I think this is a great way to revive local business but for this to be sustainable, Australian local business needs to increase efficiency and drive costs down, and that means more effort into digital transformation,” Liang said.
Regulation. During the Global Financial Crisis of 2008, Governments around the world bailed out many banks and financial institutions. To minimize the risk of this occurring again, enhanced capital requirements were introduced. Liang believed COVID-19 will usher in a fresh wave of regulations impacting all industries. “Governments will look to distance themselves from bailouts and shift responsibility onto businesses themselves,” he said. “This could lead to similar regulations across industries for all companies of a certain size, which would need to hold and retain a certain level of regulatory capital.” This push, he said, would be another driver of digital transformation.
Personal experience. COVID-19 is changing the way many people look at the world. “It has changed the foundation of life for many, and they look at work, family and community differently,” said Liang. This would change many people in terms of their values and sense of purpose, and would create new demand and new services. “And digital will certainly be leading the way,” he said.
Inoculating against digital malaise
The webinar heard from several Australian technology companies in the RegTech sector who were being impacted, and largely positively, by the COVID-19 experience.
Bruce Wren, the cofounder and chief executive of 1WordFlow, showcased his company's suite of solutions to rapidly transfer analog and paper documentation to digital.
“There is a seismic change going on in the management of documents, and we are at the cutting edge of that,” Wren said.
1WordFlow, he said, was seeking to “redefine what a document actually means” and create one secure place for all documents, eliminating issues of version control error.
He cited the example of Netflix and Spotify, which were platforms that allowed users to access one version of a television program or a piece of music multiple times.
In the past, Wren said, people would go to a video shop to hire a movie to watch, and there would be up to a million copies of that same film available at other video shops around the world.
Where the video industry had transformed through streaming, this had not happened with documents which were the “last frontier” in digitization.
Wren said there were three trillion new PDF and Word documents created each year. Most people in organizations would access up to seven different depositories each day to view documents, taking up to 16% of their time searching for lost documents. Meanwhile, poor version management creates errors in 23% of documents.
“COVID-19 is an opportunity to go digital. Clients are realizing they should be digital,” said Wren.
Photo credit: iStockphoto/nicoletaionescu