With the world’s fourth largest accumulation of superannuation savings and a stock market dominated by the financial services sector in the shape of banks, investment funds and insurers, it’s little wonder that FinTech has been such an early focus of the next wave of technology investment in Australia.
Even so, it’s refreshing to see such a major figure in financial markets as regulator Greg Medcraft make such an explicit acknowledgement of the role of technology and innovation in his sector as he did on Monday in his keynote to the Australian Securities and Investments Commission Forum in Sydney.
The ASIC chairman laid out the opportunities and the risks of what he boldly described in the title of his address as the Fourth Industrial Revolution.
Indeed, it is the sort of clear-headed speech that would be heartening to hear right now from the Prime Minister.
“It is clear to me many people are frustrated by the present economic circumstances – and inequality – in much of the world, which is contributing to these political upheavals,” Mr Medcraft noted at the outset.
“It is important that we examine and reflect on how the markets can function for the benefit of all.”
“Post-GFC – through the work of the Financial Stability Board, IOSCO and other domestic and international organisations – a more stable and resilient global financial system is being built.
“But from where we sit, emphasising domestic and national interests over global interests may create a climate in which global markets become increasingly fragmented. This is not in anyone’s interest.”
He concluded with a strong statement about leadership.
“As we move into this futuristic world, we must consider what underlying foundation is needed to support innovation and growth.
“We are entering a period where responsible leadership has never been more critical, especially in the leaders who drive the innovative strategies of the future.”
In between, Mr Medcraft laid out the broad technology environment and why FinTech is so important, outlining three key benefits:
- reducing the cost and improve the efficiency of product and service delivery across the financial sector
- empowering customers who will be able to deal directly, more seamlessly, and flexibly with product and service providers, and
- empowering businesses to deliver a better value proposition and customer experience to their customer base through improved data analytics, giving a better understanding of customer behaviour and customer needs
As well as FinTech, Mr Medcraft also expounded on theories of regtech! (That’s short for regulatory technology, patient reader).
“The way in which we are approaching regulation is transforming. The way we monitor and regulate is increasingly data-driven, “ Mr Medcraft noted.
“RegTech offers us the opportunity to better detect, understand and respond to misconduct.
“Through increasing access to data and more sophisticated analytic tools, we can be more proactive and pre-emptive in understanding and addressing the risks we see.
Importantly, he linked all these developments to the fast emerging thematic of Artificial Intelligence that is most definitely 2017’s new black.
Mr Medcraft described 2017 as a “critical year” for blockchain technology – the big focus of last year’s ASIC conference and which he prefers to describe as “distributed ledger technology “ as the industry moves from the chitter chatter stage to “ testing its abilities to create new efficiencies in the system.”
He revealed that ASIC will shortly publish an information sheet for industry participants “who are implementing and testing distributed ledger technology solutions” to assess whether using the solution would meet the relevant technology and risk management requirements.
The information sheet will be relevant for both existing licensees and start-ups and “ we think it will help to fast track our discussions with stakeholders and we will use the framework as a conversation starter as the technology continues to evolve.”
And then, of course there are the risks.
“Greater customer and investor control and direct engagement without appropriate understanding of the risks of products and services raise the risk of investor harm,” Mr Medcraft said.
“There will be new channels though which fraud may be perpetrated both within and across borders,” Mr Medcraft said.
“The growing use of technology to capture, store and analyse data increases the risks of that data being misused, and the systems used to capture and store the data being subject to cyber attacks.
“Privacy is also an issue. There are also risks data will be stored, used and shared with others against the wishes of the consumers providing the data.”
Still, what was missing was a granular sense of the industry he watches over as being part of an Australian business thematic, or the regtech challenges facing ASIC, as part and parcel of a broader regulatory challenge facing Australia’s various business and consumer watchdogs, although this arguably is the job of government ministers not bureaucrats.
And that, one suspects, goes to the continuing lack of an overarching view or coordination that still seems to be needed at a whole of government level.
Nonetheless the focus by ASIC this is week is a big step in the right direction. More of it please!