Peter Whish-Wilson (Tasmania, Australian Greens) Share this | Hansard source

I was just making the point that the Treasury Laws Amendment (2018 Measures No. 2) Bill 2019, the bill for a sandbox for fintech, may well become kitty litter for spivs if we don't have the right controls in place, if I could use that analogy. Those parliamentarians who are perhaps caught in the thrall of fintech need to consider this very seriously.

Let me remind senators of the drastic consequences that financial innovation can have. I want to give you a couple of examples that relate directly to consumers as well as investors. On the consumer side, this bill opens the door for new forms of payday lending to operate without a licence. Can anyone seriously say that what we need right now is faster and looser controls around consumer credit and more ways for loan sharks to ply their trade?

It's worth looking at what happened recently in the UK in this respect. Fintech payday lender Wonga was basically an app that allowed people to get quick loans online. Wonga was charging effective interest rates of up to 1,500 per cent to their customers. In their drive to get big and go public, they got loose with lending standards, and it all went belly-up—a story I think we're all very familiar with—leaving about 400 million pounds in outstanding loans. Yet, through this bill, the government is paving the way for fintech payday lenders—loan sharks—to get in the sandbox here in Australia.

Let's be totally frank about this: we are making it easier for these start-ups, if that's what you want to call them, or these fledgling fintech companies to raise more money, to go to investors. Why are we doing that? Because, obviously, this industry has lobbied for this because they're finding it difficult to access capital. They're finding it difficult to access capital because this is a very complex and high-risk area, and they're asking for a lowering of regulations and standards to get them up and running. I don't have a problem, as I said earlier, with professional investors investing in these kinds of businesses, because they know what they're doing and they're usually very well diversified. I do have problems with mums and dads who are at a barbecue, who hear about the next best thing since sliced bread, who jump on board without adequate disclosure of risks and who end up getting burnt. It doesn't matter whether it's $1,000, $10,000 or $20,000—that's a lot of money to many small investors.

For investors, this bill is likely to pose even more risk. In the brief time that fintech start-ups have been selling their products, we've already had some pretty good examples of what can go wrong right here in Australia. There's Bux Global, who developed another app—there's always an app—that would allow customers to transfer money internationally. The now Chair of AMP, David Murray, was an adviser to this company, but even David Murray, with all his experience, couldn't foresee that the company was going to go bust and leave investors short-changed to the tune of $100 million. How about Sargon, who were going to provide electronic superannuation infrastructure services? I'm not quite sure exactly what that is; however, former senator Stephen Conroy—I used to enjoy his contributions in this chamber—was on the board, and they were also shaping to go public. That also collapsed late last year and is now under administration.

The conclusion, to put it simply, is the parallels between the frenzy around fintech and things like the millennium dotcom boom are remarkable. I didn't participate in the inquiry that went around looking at and hearing evidence on the companies, and I respectfully also highlight what I highlighted at the beginning of my contribution, which is that I understand that these kinds of businesses can be important for the economy in terms of increasing competition and breaking down concentration of power, particularly in credit markets, but we've got to get there the right way—the right way that protects investors and consumers.

I remember One.Tel from 20 years ago, and I'm very concerned that we're going to repeat a similar kind of investment catastrophe, such as we've seen with Bux Capital and Sargon, if we loosen standards and we don't have the right regulations in place. I wish these companies well. I certainly hope they turn out to be successes, both for the people who run these companies and their investors, but 'buyer beware' doesn't cut it. We know that even in the best examples where financial advisers, even with licences, provide information to consumers, often those consumers aren't financially literate. They don't fully understand the risks, and that is no longer, after the Hayne royal commission, an excuse under law, and nor should it be in this instance.

I want to finish by saying that one thing we've learnt from the royal commission is that, if we're to protect consumers and protect investors, we need a better regulated financial industry. We don't need more loopholes that allow disreputable operators to operate in this kind of high-tech, highly complex environment.