Regulation stifling financial tech innovation in Australia

Rebecca Merrett (CIO)

regulation

The Australian government needs to take a more balanced approach to regulation and stop stifling banks’ ability to innovate, several financial institutions have urged in their submissions to the Financial System Inquiry.

The inquiry received about 219 submissions by the end of March 2014.

Banks said they have found it difficult to keep abreast of rules around the electronic delivery of disclosure information.

“Until very recently, insurers in Australia were prohibited from delivering disclosure information –such as a product disclosure statements and policy wordings – electronically,” QBE said in its submission, adding that this contributed to significant mailing costs for insurers.

“This really demonstrates that in some cases, we are decades behind the times. More significantly, it also creates the impression for consumers and customers that the insurance industry is lagging badly behind in terms of the speed of society when in fact, it is impeded by restrictive and outdated regulation.”

Suncorp Bank, along with a few others, agreed, pointing out that paper-based and face-to-face methods of delivering disclosure information “creates a very real barrier for responding to consumer preferences”.

“Increasingly, customers demand the ability to bank wherever they are, however they want and in a timely manner. The majority of customers are eager to adopt new approaches that make their banking more convenient and faster,” Suncorp said.

“A move to balance electronic forms of communication with paper across the various pieces of regulation offers many benefits, including a more measurable and interactive engagement with disclosures, faster and more convenient services, and the possibility of an easier process for multiple services.”

Many banks also showed support for a principles-based approach to cloud computing over prescribed guidelines that are seen to restrict the uptake of the technology.

“Regulatory guidelines should encourage, and not limit, the industry advancement around the use of new technologies such as cloud or third party computing services via a clear set of industry principles,” said National Australia Bank.

Westpac suggested banks and regulators need to take a collaborative approach when it comes to the take up of new technology rather than using prescriptive measures.

“The impacts of technology are typically not ‘black and white,’” Westpac said. “Supervisory agreement to ‘pilots’ of new technologies – that would test their functionality and resilience with a small sample of customers – is an example of this collaborative approach that Westpac supports and which has been effective to date.”

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