Published on the 09/12/2014 | Written by Beverley Head
Australia’s Financial System Inquiry has cast technology as banking’s curate’s egg – delivering the sector and consumers with enormous change that is ‘good in parts’…
According to the report, which was released on Sunday, “The disruptive effects of innovation have the potential to deliver significant efficiency benefits and improve user outcomes, notwithstanding costs associated with adjustment for industry, and possible uncertainty for some consumers about change.”
But it also noted that, “As technology continues to increase network speeds, broaden distribution networks and heighten levels of interconnectivity, these changes can also amplify the risks of innovation across the system. The pace of technology-driven market developments can challenge regulatory frameworks and make it difficult for regulators to adapt with sufficient speed. Failure to manage these risks may result in system-wide impacts and/or adverse consumer outcomes.”
Attempting to cut out the bad bits and magnify the good, David Murray the former CEO of the Commonwealth Bank, who chaired the inquiry has called for a series of technology-related actions intended to “enhance the resilience of the Australian financial system”.
Key among those recommendations is the establishment of a committee forged from private and public sector participants which is able to “facilitate financial system innovation” and encourage timely policy and regulatory responses. This is clearly an attempt to wrest back control given the pace of change in the financial sector courtesy of disruptors such as peer-to-peer lending, mobile payments, virtual currency and crowdfunding.
With regard to the latter, the FSI report provides qualified support for crowdfunding including allowing retail investors to participate if they can be protected with some form of investment cap.
Other key recommendations with implications for the technology sector include the proposed establishment of a federated model of digital identifiers which allows both public and private organisations to compete to supply trusted identities to individuals and businesses. This is an attempt to take friction out of the system, boost security and reduce the risk of identity theft.
The FSI also examined the issue of data analysis and potential benefits for consumers. It recommended that the Productivity Commission investigate the benefits of increased access to and use of data by the financial sector, and whether individuals should be provided access to more of their personal data. It also noted the relative paucity of Government data sets which had currently been made when compared to other nations.
The FSI was launched by David Murray and Australia’s Treasurer Joe Hockey over the weekend; the industry has been offered the opportunity to respond to the recommendations by March next year.
