The rise of fintechs and the digitisation of the finance sector has signalled a “paradigm shift” for both business and government, presenting both with opportunities and challenges Federal Treasurer Scott Morrison said.
Speaking at the G20 conference at Wiesbaden in Germany late last week, Mr Morrison outlined how innovation was transforming finance and presented a broad overview of Australian government policy in the sector.
“Fintech is the way of the future. There is, without a doubt, a paradigm shift taking place,” Mr Morrison said.
“While we cannot go backwards, the success of fintech is not guaranteed. It is important that all of us work together, across borders, to help build this industry so that it can deliver for consumers, for businesses and for our respective economies. That is what this moment, this opportunity, demands of us.”
It was important that governments “evolve and adapt” to these technological changes in order to capitalise on the opportunities on offer.
“We must ensure that our policies and actions harness and realise the full potential of fintech – by removing barriers to these innovations and encouraging our citizens and businesses to embrace new financial product and services – while maintaining acceptable risk levels to ensure that confidence in our financial system is retained,” he said.
Fintech Australia CEO Danielle Szetho says Mr Morrison’s priorities fall largely in line with what the community has been calling for.
“The agenda we’re setting is pretty similar,” Ms Szetho told InnovationAus.com.
“Mr Morrison is right to talk with pride about the things we’ve achieved. Australia is making forward steps with regulatory changes as opposed to other jurisdictions, which has been like putting lipstick on a pig. It’s actual, real concrete policy change to be proud of.”
The speech did not offer any new policies or developments, but the Australian local fintech companies will be buoyed by the government’s continued focus on the sector.
Fintech in Australia has been somewhat siloed from the Commonwealth’s revolving door of Innovation ministers (it falls within the Treasurer’s portfolio) and has been one of a handful of consistent priorities in the innovation space of the Turnbull Government.
While much of Mr Turnbull’s National Innovation and Science Agenda has been dropped from the public conversation, fintech has remained a focus.
Ms Szetho says the government now has a good understanding of the fintech space and the issues it faces, but it is still struggling to get the major policies through.
“We’ve had very consistent support from Treasury, but we need to be working harder to engage more of the innovation community,” she says.
“I think the government has a very good finger on the pulse, but I’d like to see a lot more being done. We need more unity across government to deliver on policy change.
“We have the right conversations and initiatives in place, but the challenge we’re running into is the successful conversion of these changes into actual firm policy.
“That’s really starting to get caught up in this problem we have at the moment where the politics is getting in the way of actual outcomes.”
Of the government policies that have been able to put place, their effectiveness remains to be seen.
These policies include the establishment of a Fintech Advisory Group featuring many startup founders, the introduction of a “regulatory sandbox” for tech firms to test services without a licence, the prolonged and controversial introduction of equity crowdfunding, and the range of tax incentives on offer in the flagship Innovation Statement.
The regulatory sandbox is a good start, Ms Szetho said, but did not go nearly far enough.
“We’re pleased that it got off the ground but there are more things we want to broaden into it,” she said.
And the equity crowdfunding still remains in limbo after the Opposition dropped its support for it last year.
“It’s a bit disappointing that Labor withdrew their support at the very last minute,” Ms Szetho said.
“That really put Australia behind. It’s a really important thing for us to be chasing in the next couple of months.”
The Treasury has also established an Innovation Hub to provide “informal assistance” to fintech startups working with regulators.
According to Mr Morrison, this group has helped more than 100 companies and has granted 24 licences “almost twice as fast” as those that didn’t consult with it.
“The government wants fintech in Australia to grow – to grow big, to thrive and to deliver benefits for consumers and the economy,” Mr Morrison said.
“We see the talent that’s out there, and we know that supporting this industry to grow and thrive is of critical importance.
“If we do this, we can create a modern and stronger financial system.”
Mr Morrison said government was investigating ways to “reduce the global average cost of sending remittances” as well as investigating the potential of new regulatory technologies.
In the speech, the Treasurer also pointed to monetising digital data – “how we can create and capture the value-add from the massive amount of data that’s becoming available in a more digital work place”
Mr Morrison says it’s important that new technologies don’t become a “victim of fear”.
“There are undeniable risks in enabling data to become more widely available, but the risk of harm needs to be assessed based on the likelihood and the scale of potential damage,” he said.
“Risk assessment and mitigation processes should be put in place for the release and sharing of data, as well as collection and storage.”