The final report from the Royal Commission into Australia’s banking sector presents “many opportunities” for the local fintech sector, but has put companies “on notice” to not repeat the mistakes of the big banks.
Commissioner Kenneth Hayne handed the final report to government late last week, and it was released to the public on Monday. The near 1,000 page report includes 76 key recommendations to government focusing on cracking down on the unsolicited sale of financial products, the banning of conflicted remuneration earned by intermediaries and proper enforcement of rules and regulations.
The Commissioner also referred 24 financial institutions to ASIC for possible criminal charges, including all the major banks except for Westpac.
Treasurer Josh Frydenberg addressed the media upon the release of the report, accepting all of the recommendations and issuing a warning to the financial sector.
“My message to the financial sector today is that this misconduct must end. You must put the interests of consumers first. Consumers must be treated honestly and fairly,” Mr Frydenberg said.
The fintech sector is not mentioned in the report at all, and “technology” is only mentioned four times. But the damning indictment of the financial sector in general provides an opportunity for Australia’s burgeoning fintech sector to draw customers away from the big banks and do things differently, said Fintech Australia chair Alan Tsen.
“Although we’re still digesting the report and the recommendations, it is clear that there are many opportunities for fintech startups to both partner with these institutions to solve some of the systemic issues that have been highlighted, and also take advantage of the verticals where customers have been poorly served by incumbents,” Mr Tsen said.
“Overall, we see the outcome as highlighting some key areas for improvement in the way customers are served by those providing financial services – this is where many fintech startups excel: in aligning customer outcomes with their business model.”
While the Royal Commission shone a spotlight on malpractice and misconduct in the broader financial sector, it has also put smaller fintechs on notice, said Roll-It Super founder and CEO Mark MacLeod.
“Fintech startups and investors with rent-seeking, ethically questionable business models, based on selling private individual data, having high or hidden fees, exploiting customer ignorance or financial desperation, should be on notice and will face the risk of criminal charges. Change is coming and it is not just going to impact the big banks,” Mr MacLeod said.
“Fintech needs to build around ethical, sustainable business models. In a sector devoid of trust, fintech startups can differentiate themselves and shine a new light of openness and transparency.”
According to MoneyPlace founder and CEO Stuart Stoyan, the final report also provides a lesson to fintechs. They must place customer interests front and centre in everything they do.
“The Royal Commission hits home the need for all fintechs – new and existing – to ensure the focus on innovation is on improving the customer experience, whether that is through cost, easing friction or just creating better outcomes,” Mr Stoyan said.
“A key takeaway for fintechs right now will be that many of the major banks’ customers will be looking for a better, more transparent offering. There’s never been a better time for fintechs to attract new customers.”
One of the few mentions of technology in the final report surrounded the impact of new developments on the financial advice sector.
“Many in the industry have recognised that technology is likely to play an important role in the future of financial advice, but there is not yet a clear picture of what that role might be. Any recommendation directed to altering the current structure of the industry would need to grapple with the fact that the industry itself will very probably look very different in five years’ time,” Commissioner Hayne said.