The Treasurer Scott Morrison has thrown the substantial weight of his office behind draft Productivity Commission recommendations that would give consumers more control over data held by banks and others about themselves, and enable broader access to datasets considered of national interest.
For anyone in the innovation and information industries sector, this is of course good news. If there is one thing the ‘data-driven economy’ needs like oxygen, its access to data.
And the FinTech sector’s growing army of innovators will be giddy, as Mr Morrison seemed to press the case for changes that would lever open broader access to customer data held by incumbent banks, insurers and other financial institutions.
Speaking at the Collab/Collide FinTech conference in Melbourne on Friday, Mr Morrison said that in order “for Australia to establish itself as a global FinTech leader, we need to let the data flow.”
The speech is certainly worth a read if you’re into FinTech. It is actually more about the Treasurer’s ambitions to make Australia a powerhouse in regulatory technology – or RegTech – which he says will underpin efficiency improvements in our digital economy.
The open data plans outlined by Mr Morrison are significant. He deserves credit for taking it on as ambitiously as he has. He has given the clearest indication yet of his thinking [which seems to be directed at following the UK’s regulatory lead in this area.]
“One of the most important changes we need to make to realise our ambitions in these areas is to embrace open access data.
“Providing financial sector customers with better access to data about their own financial affairs puts them in the driving seat. It will empower them to seek more tailored financial advice, find better financial deals, and ultimately can be expected to lead them to make better decisions for their circumstances.
This approach to data is becoming more common. For example in August this year the UK’s Competition and Markets Authority (CMA) announced ‘open banking’ reforms.
These reforms in the UK:
- require banks to make customers’ financial data easily available to third parties through an information exchange standard (with the customer’s permission), for better price and product comparisons
- foster greater transparency around fees and products so that customers can make informed decisions about the fees they pay
- make it easier to switch providers, through regular prompts reminding customers to check they are getting the best deal and a better functioning switching service for bank accounts.
“I am supportive of these reforms. I want Australians to be in a position to make better decisions,” the Treasurer said.
“In Australia, guidelines have not kept pace with practices by innovators, particularly those that rely on big data.
Mr Morrison treads a fine line on his core RegTech messaging. On the one hand, he says that financial institutions and the finance sector has to find ways to build trust with customers and the community, but on the other warns about “excessive compliance and regulatory costs”.
The saviour may well be RegTech – and the Treasurer makes a convincing case – but idea of enabling compliance automation technologies will need to be explained to sceptical consumers.
But it’s in regulatory technology and the policy regime that develops it where the Australian economy will find huge gains in efficiencies and productivity.
“As consumer expectations and commercial offerings are changing and advances in FinTech place new pressures, our risk, regulation and compliance systems need to adapt and evolve,” Mr Morrison said.
“Better utilising technology in regulation can help us better achieve our regulatory goals, avoid the drag effects on productivity, competition and innovation and deliver lower costs and more reliable protections for consumers and the economy,” he said.
“That’s our RegTech mission.”
And he’s right, up to a point. The Treasurer is simply saying that digital technology is not only enabling the creation of new financial services, but these digitised transactions also support greater audit capacity, transparency in payments systems and improved security.
He’s saying that regulatory regimes must also leverage the technology, and that this actually de-risks the services.
But he further claims that “In the online and digitised world, de-risking and de-regulating an environment actually goes hand-in-hand.” This is the kind of bland generic statement that drives consumers crazy.
This is not a straight-forward message to sell in a political environment in which the Opposition is still calling for a Royal Commission into the banking sector. But the Treasurer is giving it a crack.
Mr Morrison laid out his thinking in his significant speech on Friday, not entirely successfully. There are a lot of moving parts in the argument, and it is going to take a lot of work to bring the electorate along – lest the regulatory changes be seen as an insider’s framework for the finance elite.
He is trying to strike the same balance many before him have had to make – a balance between demands for greater scrutiny and the risk of over-regulation. But he’s trying to make the balance at a time of tremendous technological change.
If new technology is both a disrupter and an enabler – which it is – then Mr Morrison saying RegTech should make it possible “to align regulatory and commercial interests” – which as a bland-splain is enough to give anyone the heebee geebees.
This is the same balance Treasurers have always sought to achieve, regardless of the technology.
But the Mr Morrison is being more ambitious. He sees RegTech as a competitive weapon.
He wants local FinTech innovators to thrive, obviously. But he wants the doors thrown open to attract as many international FinTech’s into Australia as the market can manage.
The policy aim, Mr Morrison says, is to “offer home-grown and offshore FinTech innovators an opportunity to develop and refine new products and services in the Australian market through a regulatory system that allows them to be frictionless through their scale journey while still becoming regulatory match fit for deployment into domestic and global markets.”
Good Lord. This is the kind of thing that makes people’s hair catch on fire. It sounded better as ‘align regulatory and commercial interests.’ And even that will make any compliance practitioner inside one of the big banks shudder.
None of this stuff addresses the trust deficit that the large banks and insurers have earned in the past decade and more.
Everyone is all for friction-free regulation, just like everyone’s in favour of world peace.
But the banks have consistently shown that unless there is an actual hand squeezing a line-manager’s throat, compliance messages are difficult to enforce.
Mr Morrison points to a bunch of nearly mature programs in RegTech that will make a difference – like the Reserve Bank’s New Payments Platform, the ATO’s Single Touch Payroll Initiative and ASIC’s industry-driven regulatory ‘sandbox’.
The sandbox, he says, will be operational by the end of the year.
“The Holy Grail is when we start to actually write regulation and legislation in code. Imagine the productivity gains and compliance savings of instantaneous certified compliance,” the Treasurer said.
Which will scare the life out of huge sections of the population.
This is a long game. But the narrative has to emerge from the closed discussions with the industry itself and engage a broader dialogue with consumers.
Scott Morrison spent plenty of time last week mapping how his plans will benefit the economy. But without a mainstream discussion that is inclusive of specific beneficiaries among citizens and small business, it does look like a closed circle.
It doesn’t help that governments are bank-rolling the industry group that is lobbying them. The Treasurer announced on Friday that he was funding FinTech Australia – yet another peak industry body – to the tune of $200,000 to promote Australia as internationally as a FinTech destination.
This is after the apparent $300,000 that the Victorian Government gave FinTech Australia to hold the two-day ‘Summit’ at which Mr Morrison spoke in Melbourne. This was a conference that cost well-over $1,000 to attend.
Surely the industry body that is lobbying government to adopt the changes that suits its financial future can under-write its own lobbying efforts. Is the government really paying this group to lobby in its own interests?
It does seem like there is rather a lot of free money on offer.
Read the speech. If you can get through it – it’s dense – there are sign-posts. But if you really want to know what’s going on, you’re probably going to need to get on the inside.