Australia needs to foster FinTech with level playing field

Australia needs to foster FinTech with level playing field

The recent Presidential election in the US and the Brexit vote in the UK clearly show that the public in liberal democracies like Australia are tired of failure by governments to ensure social justice is being served on all levels. Political and corporate leaders appear to the public to act with impunity and social policies are not addressing the increasing inequality of wealth.

These leaders seem to be out of touch with their constituents, illustrated by the surprise results in US and UK. Leaders in Australia should be warned — they ignore, at their peril, social justice issues such as the behaviour of the ‘Big Four’ banks, who operate in a publicly mandated competition-free environment and yet are not accountable to the public for their behaviour.

In Australia, 65 per cent of the population support a Royal Commission into the behaviour of our large banks according to an April 2016 Ipsos poll. The current government has ignored this and deflects the issue with a parliamentary inquiry which sits once a year, providing instead another platform for the banks to push their agenda and make hollow promises.

The recent Productivity Commission inquiry into Data Availability and Use also, disappointingly, pushes the agenda of the banks. Its recommendation is that people should have the right to read, edit and share their own data held by the banks. But the banks will still control how, when and who it is shared with. It is hardly an outcome giving power to the consumer, who supposedly owns their own data. The push to share data via open APIs by the FinTech community, which has been embraced by other governments worldwide, is seen to have little value by the Productivity Commission in Australia.

A vibrant FinTech community would provide an antidote to this behaviour; to banks serving the bottom-line instead of consumers. By its very nature FinTech can disrupt the status quo by finding innovative ways to provide financial services inexpensively, putting customer needs at the centre of its proposition and providing real choices. For this reason, the major banks are rightly concerned.

Acorns is one such example, providing inexpensive financial services to consumers while building their financial literacy. It allows Australians, many for the first time, to access equity markets for as little as $5, instead of sums of roughly $5000 to access to managed funds. Already, tens of thousands of consumers have adopted the app, and it ticks many of the boxes the government was trying to achieve when they made their announcements about encouraging FinTech in Australia.

However, Acorns doesn’t fit the banks’ innovation agenda, and for this reason has been subject to misleading information and specific bank led campaigns to discourage users from adopting it. It effectively means tens of thousands of customers have been frightened away from the app.

We have reached out to the government to address these actions by the banks with no response. Further, there is little that the regulator ASIC can do until the reforms recommended in the Financial Services Inquiry are passed by the government.

While we welcomed findings from the recent parliamentary inquiry into the banks, calling for a regulatory function to monitor competition, it is unlikely the government will adopt these recommendations. We believe there needs to be more to challenge the Australia’s banking system. This is why we need a Royal Commission into the banks.

The government needs to show the people of Australia they are not captive to active lobbyists and political contributions; that they have a different agenda to the banks, not only when it comes to FinTech but in all parts of financial services. Calling a Royal Commission into the banks would signal loud and clear to the Australian public that anti-competitive behaviour will not be tolerated.

But further than that, we need the government to stand behind their word and support FinTech innovation in Australia. Innovation in Australia market will not happen if the banks set the agenda. Research from Frost & Sullivan predicts the local FinTech market could add $1 billion in value by the year 2020. It is an economic imperative that Australia not only rides the wave of innovation but leads it. For this to happen the government needs to develop concrete measures to help foster FinTech in Australia.

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Source: Australia needs to foster FinTech with level playing field – The Australian