Last week the Australian senate announced it would launch a new select committee to ensure the FinTech and RegTech sectors keep growing and remain compliant. Now, industry leaders have revealed what they think about it.
The committee will also take a closer look at how the industry is developing globally. It will also investigate any obstacles for the adaptation of the technology, barriers to uptake, how banks deploy technology to ensure compliance and the New Payments Platform, an industry wide Australian platform ensuring fast digital payments that was rolled out in 2013.
Liberal senator Andrew Bragg motioned to establish the committee, which will run for a year and involve major banks, startups and maybe even global technology players.
Several stakeholders in the industry have already welcomed the initiative. “[It] is an encouraging step as financial institutions and other regulated sectors have by no means gone mainstream with their adoption of technology,” says Anthony Quinn, founder and CEO of Arctic Intelligence, the RegTech company specializing in anti-money-laundering (AML) compliance, when speaking with RegTech Analyst. “We have seen some early adopters dip their toes in the water but many other businesses spend more time talking about innovation than they do adopting it.”
Despite his optimism, Quinn is a little concerned that the scope of the committee might be too narrow. While it will collect insights from major banks, startups and global technology players, Quinn wonders if it is not “too narrowly focussed [as it] predominantly seems concerned with open banking and consumer data rights, rather than far wider spectrum of use cases for FinTech and RegTech.”
A second concern of his is that the one year working period is too long for his taste. “Many good businesses could have gone to the wall as they struggle to get traction when there is only a small pool of companies in Australia willing to adopt new regulatory technology,” Quinn suggests.
Rebecca Schot-Guppy, general manager at FinTech Australia, the industry body, particularly praised that the committee would look into how neighbouring markets have adopted FinTech and RegTech. “[We] applaud the government for taking a wider view and looking to other markets, which has been something FinTech Australia has advocated for a long time given Hong Kong and Singapore’s National Strategy for FinTech,” she tells RegTech Analyst.
Schot-Guppy adds that the success of the FinTech scene Down Under relies on customer adaptation and that the government can help raise awareness about what the sector has to offer. “[The government] could play a role in helping first validate and then promoting these services to consumers,” she says. “Trust is hard to earn in financial services. [The government] simply talking publicly about new offerings on the market and their benefits could greatly aid FinTechs in building that trust.”
The news about the senate committee comes at a time of massive transformation in the Australian financial sector. The changes comes in the aftermath of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. It was launched in 2017 after a series of exposes about the banking sector circulated in the press, including stories about how big institutions ignored money laundering for drug syndicates, terrorism financing and statutory reporting.
In the end, the commission’s final report issued 76 recommendations to minimize the risk of bad behaviours in the banking sector. The list of recommendations included expanding the accountability regime, giving civil penalties for mortgage brokers failing to act in the best interest of clients, annual reviews of fee arrangements and reviews of culture in financial services.
This has seen regulators double-down on their effort to ensure companies comply with ethical and legislative rules. In March, the government set aside an additional AUS$550m to boost regulations in the financial sector. And it has not stopped there.
For instance, Wayne Byres, the chairman of the Australian Prudential Regulation Authority (APRA), recently urged financial services leaders to take responsibility for bad behaviours. He essentially also said that because they had proven incapable of self-regulating, they would simply have to face more regulation.
The Australian Transaction Reports and Analysis Centre (AUSTRAC) also issued a stark reminder of the changing attitude of the Australian authorities in early September. The reminder came in the form of the organization issuing foreign exchange company Compass with an AUS$252,000 infringement notice for allegedly failing to introduce adequate systems and processes to identify, mitigate and manage the risk of financial crimes.
These efforts are already yielding some results. AUSTRAC recently reported that the number of businesses self-reporting that they had failed to live up to the anti-money laundering rules had spiked.
At the same time, the country’s leadership has pushed to encourage innovation in the financial services space. An example of that can be seen in the banking space where the introduction of restricted authorized deposit-taking institution (ADI) licenses enabled a slew of new challenger banks to set up shop in Oz.
One of them was the neobank Up, led by co-founder Dominic Pym. “At Up we believe that the new era of banking should be focused on customer engagement and use technology to help Australians spend wisely and save effortlessly,” he tells RegTech Analyst. “Therefore, we encourage as much innovation in the FinTech space as possible. More innovation means better outcomes for consumers so they can be more in control of their finances.”
Welcoming the government’s initiatives, Pym says, “The current opportunity for FinTech’s and RegTech’s in Australia is significant. The recent government initiatives of the FinTech sandbox and restricted ADI’s have demonstrated a commitment from government to support the sector and have provided a catalyst for innovation and a pathway for smaller players to compete with the big banks and other financial services firms.
“It’s great to see government supporting different channels to market, whether that be FinTech’s partnering with big banks or being granted new restricted ADI’s. The government giving FinTech’s and RegTechs the freedom to innovate will lead to better outcomes for the industry as a whole. Just like we’ve seen in the UK.”
Assembly Payments co-founder and co-CEO Simon Lee is another FinTech entrepreneur welcoming the senate committee. Arguing that financial policies up to recently have been focused on the leading big banks and financial institutions, he tells RegTech Analyst that he hopes “the committee can help create a level the playing field by either expanding the regulatory sandbox programme or setting up a separate regulatory regime for non-bank payment providers like Assembly which would foster further innovation and competition in the sector.”
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