Today, people don’t need banks, taxis or hotels to access financial services, transportation or accommodation. Digital, innovative companies aren’t playing by established industry rules—and regulators must walk the fine line between enabling digital newcomers to deliver efficiency and innovation, while also minimizing risk for consumers and the burden of adjustment for incumbents.
My colleagues Matthew Robinson and Kuangyi Wei explore “How Digital Changes Oversight” in a recent article in Outlook, Accenture’s online journal for high-performance businesses. In the article they suggest that regulators can be guided by some of the same strategic considerations utilized by digitally disruptive companies active in the sharing economy, including:
1. Think about the customer
To make sense of new entrants and their services, regulators should adopt a market view—for example, instead of thinking about traditional industries like hotels or taxis, considering the market for overnight accommodation or transportation within a city. In doing so, regulators can better address the underlying market need. Namely: What is a new entrant’s ability to improve or upset the current market balance, and how does it compare in terms of price, quality, availability, choice and safety?
2. Consider the competition
Digital disruptors typically straddle several industries. For example, Apple Pay touches telecom, financial services and retail industries—and effective regulation of it and similar services will require collaboration between regulatory bodies across industries. An added benefit of collaborating is the creation of common frameworks to encourage more companies to develop cross-industry products, to drive growth and productivity.
3. Look global
New competitors don’t just disrupt one industry; they straddle several. Similarly, national borders aren’t barriers for digitally enabled businesses. Regardless of location, customers expect access to the same services and customer experience. As a result, regulators will increasingly depend on international collaboration.
Digital disruptors don’t compete in existing markets: they create new ones. Regulators need to become as agile and adaptable as the companies they seek to regulate. While comprehensive assessments are important, digital tools and techniques can help regulators pilot, refine and innovate regulatory adaptations—to quickly find out what works and what doesn’t.
Regulators must do more than react to changes—they need to anticipate possible changes. Horizon-scanning activities can reveal systemic risks and emerging trends and help regulators keep up with the pace of change.
To help regulators build new capabilities to navigate these changes, the authors offer three areas of focus: talent, technology and tactics. Their article is illuminating and highly recommended. Read this article here.