When a citizen applies for a business licence, updates their address, or renews a professional credential, they’re often unaware of how many systems their data passes through – or doesn’t.
Sometimes, that information bounces between departments like a pinball, delayed by outdated databases, redundant requests, or misaligned standards. Other times, it just stops, trapped in a silo.
Now, imagine the opposite: a system where verified information flows instantly and securely across agencies, from licensing authorities to tax offices, from public registries to compliance units, with no need for applicants to re-enter a single detail.
This isn’t a tech utopia. It’s interoperability. And it’s rapidly becoming a baseline expectation for public sector modernisation.
According to a report by the World Bank’s Interoperability Working Group, interoperability is essential to overcoming siloed government structures and enabling more coordinated, connected, and responsive public service delivery.
But interoperability is not just about pipes and protocols. It’s about changing how regulation works; how it enables better oversight, better services, and, ultimately, better outcomes.
How interoperability powers smarter, faster regulation
At its simplest, interoperability means systems that can talk to each other – not just technically, but meaningfully.
Imagine a country where a sole trader registers their business once and that information flows securely and instantly to tax authorities, licensing boards, workplace safety inspectors, and even social services when needed. That’s interoperability in action.
In a regulatory context, this means fewer silos, less duplication, and more coordinated oversight. It enables what some call “once-only” government, a principle where citizens and businesses provide information just once, and governments reuse it responsibly across agencies.
This is already happening in places like New Zealand, where a digital portal integrates directly with the New Zealand Business Number (NZBN) via an API. The API allows staff to access and consume publicly available business information on the NZBN Register, reportedly improving user experience and efficiency by reducing manual human inputs, and data accuracy by accessing up-to-date business information on New Zealand businesses.
Across the European Union, national “registries of registries” and semantic catalogues create shared data definitions and rules for access, enabling governments to collaborate on everything from tax administration to urban planning. And in Finland, the City of Helsinki’s AI-powered urban planning project connects departments and citizens to co-design neighbourhoods with shared visual data.
These are reminders that interoperability can also power transparency and trust.
Benefits beyond convenience
When systems interoperate, benefits stack up fast – especially for regulators.
First, there’s service speed. Integrated systems allow real-time data sharing, trimming approval timelines, reducing backlogs, and helping frontline staff focus on higher-risk cases. Governments using shared data also reduce errors, catch inconsistencies earlier, and eliminate redundant processes.
Second, there’s smarter, more proactive regulation. With access to verified, current data from across agencies, regulators can better target inspections, personalise compliance pathways, and even issue timely reminders before issues escalate. Integrated datasets also support evidence-based policymaking and enable richer analysis of sectoral risks.
Third, it can improve public trust. When interoperability works, citizens and businesses experience government as a unified whole, not a labyrinth of disconnected departments. Transparency improves when interoperable systems generate clearer audit trails and more consistent outcomes.
As the Interoperability Working Group’s report puts it: “The immediate effects of an interoperable public sector are an increased connectivity of information technology (IT) systems and that governments can access, share, interpret and reuse data more easily and at a larger scale.” In the longer run, these developments can support governments in becoming more citizen-centered and data-driven.
A foundation for digital regulation
For regulators specifically, interoperability has become not just a convenience but a strategic necessity.
In licensing and registration systems, interoperability ensures regulators can instantly validate applicant information against trusted registries, thereby cutting fraud risk and administrative friction. In the realm of enforcement, it allows compliance teams to trace activities across jurisdictions. And in policymaking, it helps regulatory leaders see how their frameworks interact with those in other sectors.
The World Bank’s GovTech programme highlights this holistic role, noting that interoperability frameworks are a key enabler of whole-of-government transformation. Its report explains that such frameworks reduce system boundaries between agencies, allowing for the seamless flow of information across organisational silos.
But as with any foundational shift, the move toward interoperable regulation comes with real yet surmountable challenges.
The obstacles are operable
For all its promise, interoperability can be maddeningly hard to implement.
Barriers aren’t just technical. Yes, legacy systems, outdated standards, and patchy APIs do present serious obstacles, but the deeper challenges are organisational, legal, and cultural.
The same World Bank report also found that a majority of interoperability failures stem from “institutional data hoarding,” or when agencies treat data as power and resist external access. Civil servants, trained to minimise risk, may hesitate to champion cross-agency experiments. And conflicting laws – like those governing health versus business data – can make integration legally fraught.
Even when the will exists, resourcing represents another huge hurdle. Interoperable systems need upfront investment, governance frameworks, and new skillsets.
For one, there is a significant gap between the advanced digital skills required (think API management and semantic modelling) and the current capabilities of most OECD public sector workforces. OECD reports suggest that a shortage of advanced digital and data skills is a major barrier to digital transformation in government.
And yet, there’s progress. The EU’s Interoperability Framework includes 47 recommendations that span tech, legal, and organisational alignment. In a 2024 UKAuthority survey, 72% of public sector digital leaders said they use APIs to integrate legacy systems with new services. And New Zealand’s aforementioned portal reportedly reduced staff resistance through collaborative design.
What the private sector can (and can’t) teach
As with all areas of public sector digital transformation, it’s tempting to look to private tech for inspiration. Indeed, many interoperability innovations originated and thrived in corporate settings.
But the public sector plays a different game.
In government, data must be treated as a public asset, not a monetisable product. Mistakes can carry life-altering consequences, and public services are bound by principles of equity, inclusion, and accountability. Where private firms can iterate quickly and tolerate small failures, public regulators must move deliberately and get it right.
That’s why many experts argue that public sector interoperability must be governed by layered accountability: clear technical standards, legal frameworks, ethical guardrails, and participatory design. It’s also why digital regulation demands talent not just in tech, but in law, ethics, and community engagement.
Making interoperability a pillar of modern regulation
If the public sector is to reap the full benefits of interoperability, regulators need more than a seat at the table. They must be central to the conversation.
That means CIOs and compliance directors working side by side. It means policy teams thinking about shared data as infrastructure. And it means seeing interoperability not as a project, but as a principle of modern governance.
Already, the contours of this future are visible.
In Australia, the Digital Identity program aims to link credentials across government and commercial services. In the UK, Companies House and other registries are quietly upgrading their APIs. And in New Zealand, the NZBN model is helping show what’s possible when agencies cooperate.
But perhaps the clearest sign of momentum comes not from a platform rollout or a white paper, but from the shift in how public sector and IT leaders talk about connection itself.
No longer a niche IT goal, interoperability – challenging as it is to achieve – is being recognised as essential public infrastructure. In a regulatory world defined by complexity, interoperability is more than a technical upgrade. It’s a public good. Think of it as the invisible engine of smarter, faster, and fairer government.
