The government has launched an inquiry into fintech and regtech to assess opportunities and barriers in the sector. And while startups largely welcome the move, they have some key outcomes they would like to see.
On Wednesday, Senator for New South Wales Andrew Bragg passed a motion to establish a Select Committee on Financial Technology and Regulatory Technology, which will inquire and report on several aspects of the fintech and regtech sectors.
It will look into the size and scope of the opportunity they provide to Australian consumers and businesses, the barriers to uptake of new technologies, and where our industry is at compared to other global regimes.
The committee will also assess the progress of fintech facilitation reform, as well as current regtech practices, particularly regarding the opportunities for strengthening compliance practices while also reducing costs.
Finally, it will consider current initiatives for promoting fintech and regtech startups, and whether they’re effective or not.
Speaking to StartupSmart, Rebecca Schot-Guppy, general manager of FinTech Australia, says this is something the advocacy group has been pushing for over the past two years.
“A lot of consumers still aren’t aware of what fintech is and what it means,” she says.
“We have a big role in driving consumer awareness to increase adoption.”
Evan Wong, co-founder and chief of regtech CheckBox, tells StartupSmart the fact that regtech is being addressed as a separate category is “quite empowering” for startups in the space.
“Regtech has always been classified as being a subset of fintech, but when you think about it, yes the finance industry is the biggest consumer of regtech, but regulation and compliance and risk is across all sectors.”
Trust and validation
The committee also comes at a time where trust in the big banking institutions is at an all-time low. That provides an opportunity for startups in this space.
“I think that’s where fintechs come into light. At the core of all their propositions trust is there,” Schot-Guppy says.
“This is where the government has an opportunity post-royal commission, to highlight these services.”
Simon Lee, co-founder and co-chief at Assembly, says the committee could ultimately serve to “validate the services provided by fintechs”.
Traditionally, Australian financial services frameworks have focused on the big four banks, and other large institutions, “with less effort undertaken to shore up the rival startup sector”, he says.
A change in dialogue
This is the latest in a string of perhaps uncharacteristically pro-startup moves from the government.
While previous government action — including the controversial AA Bill, restrictive new social media rules, and ongoing confusion about the R&D tax incentive — was widely perceived as anti-innovation, the past few months have seen the appointment of a new fintech minister, Jane Hume, as well as Industry Minister Karen Andrews hosting a roundtable with tech leaders.
“I think we’ve seen a change in dialogue,” Schot-Guppy says.
The narrative is becoming more positive, especially regarding the potential fintech and regtech have for the economy in the future.
“I do think there has been a switch in thinking,” she adds.
“And we certainly praise them for that.”
While Wong says the government has launched some pro-innovation initiatives in the past couple of years, he says when it comes to pushing the adoption of regtech, there has been a whole lot of talk, but not much action.
“Regulators like ASIC are out there hosting innovation forums where regtechs are able to showcase their technologies,” he says.
“What really bothers me is that a lot of that is still at the conversational level.”
While talking about regtech, and normalising the concept is a good start, Wong says he hasn’t seen much action from the regulators or from the banks.
In banking, particularly, “the amount of technology they’re adopting is way, way less than what they should be adopting”, he says.
“What I see in the industry is actually this strangely huge reluctance to adopt and even look at regtech or fintech.”
Wong theories technology is seen as being a risky option. Banks don’t know how regulators might react. So, instead, they hire compliance experts on top of compliance experts.
The committee and review provide an opportunity for the Senate to reassure the financial institutions, and encourage them to adopt new technologies or work with startups.
“They’re not doing it because they’re a little bit scared,” Wong suggests.
“How do you overcome that fear? That’s the key thing for me.”
All buzz, no bite
Now an inquiry is on the way, Schot-Guppy, Lee and Wong all have a wishlist of what they would like to see on the other side.
“The best possible outcome will be a national strategy, with key pillars,” Schot-Guppy says.
Those pillars should include a look into talent, the jobs of the future, how to access capital for startups to help them scale, and a national strategy for R&D.
She would also like to see a strategy for how best to drive consumer adoption.
“And then, more broadly, what are the regtechs or fintechs necessary for institutions to change the dynamic we’ve seen over the past 100 years, into more of that trust, compliance, regulatory environment that we need to succeed?”
For Lee, it’s about helping create a level playing field, “by either expanding the regulatory sandbox program or setting up a separate regulatory regime for non-bank payment providers”.
Such measures would help foster further innovation, and drive healthy competition, he says.
“Ultimately, it is the consumer that will benefit, and Australia will keep pace with developments in the global fintech sector,” he adds.
Wong is specifically looking for solutions “that are super-actionable”, he says.
The committee needs to get to a place where it’s putting forward initiatives that will really make a difference “in terms of adoption at the ground level”, he says.
“There’s already been years of talk, and it hasn’t translated all the way through to the end,” he adds.
“It’s a bit frustrating when you attend all these events as a regtech, and there’s a lot of buzz, but in reality when you draw the curtain, there’s not much happening behind it.”