Andrew Bragg (NSW, Liberal Party) Share this | Link to this | Hansard source

I present the interim report of the Select Committee on Financial Technology and Regulatory Technology, together with the Hansard record of proceedings and documents presented to the committee. I move:

That the Senate take note of the report.

I'm very pleased to be chairing this inquiry, which is about facilitating increased competition and innovation in Australia's financial sector and beyond. While Australia officially slips into its first recession in 30 years, it is clear that we need more jobs, but we must embrace technology to be globally competitive and create the jobs.

The committee was established in September last year and, following an extensive round of public submissions and hearings in January and February, the committee was due to table its interim report in March. However, COVID-19 intervened and the committee decided to reopen submissions and take further evidence at hearings in the middle part of this year before finalising this interim report. In total, the inquiry has now received more than 200 submissions from a broad range of stakeholders and held 10 public hearings. Following this substantial interim report, the committee will consider further matters relevant to its terms of reference and present a final report in April 2021.

Put simply, this inquiry is about more jobs and more choice. It is evident that this sector is growing. Technology should not be feared. The computer age has delivered enormous growth in jobs. Technology is a jobs creator, not a jobs killer. Fintech, or financial technology, is commonly defined as organisations combining innovative business models and technology to enable, enhance and disrupt financial services. Australia has a vibrant and growing fintech sector with a significant number of start-ups and scale-ups as well as several established unicorns that clearly show the incredible potential of this sector. Regtech, or regulatory technology, is the use of new technology to undertake regulatory monitoring, reporting and compliance functions.

To review and organise the material presented to the committee through the inquiry, the committee has chosen to view it through five buckets: tax, regulation, access to capital, skills, talent and culture. The committee also receives particular evidence relating to the impact of COVID-19 and technology enablers that have risen to prominence during the crisis. The committee has made 32 recommendations.

On to COVID-19: it is clear that, from the evidence received, COVID-19 has had a material impact on the fintech sector. But, as the pandemic has shown, adaptability and technology underpins the jobs of today, let alone tomorrow. While some businesses, especially well-established fintechs, have ridden the wave and experienced significant growth during this period, many newer companies have struggled with a loss of capital and faltering customer acquisition. The sector has received significant support from a number of government initiatives, including JobKeeper.

The committee has made several recommendations in relation to these technology enablers, such as allowing electronic company meetings and communications, allowing for electronic signing and witnessing of documents, continuing the rollout of telehealth services on a permanent basis and the utilisation of electronic prescriptions. The committee also identified accelerating progress on the Australian government's digital identity reforms as a key opportunity.

On to taxation: the committee heard that a competitive tax framework will assist fintechs and regtechs. The operation of the research and development tax incentive was raised by many participants.

Due to the uncertainty around the eligibility of software development for the program and the concern about audits, the committee has made recommendations that there should be additional clarity in these areas whilst noting that further legislative changes to the tax incentive are currently under review by the Economics Legislation Committee. The report also calls for the Council on Federal Financial Relations to simplify payroll tax across Australia.

On to regulation: looking at the way competition in financial services is regulated, it is abundantly clear that the current approach is fragmented and unclear, with the ACCC, ASIC, APRA and the RBA all playing roles. Witnesses viewed this fragmentation as a risk and saw the need for Australia's financial regulators to collectively provide greater focus on promoting competition and innovation in the financial system if Australia is to have any chance of competing with the likes of Singapore and the UK.

The committee's recommendations in this area are to provide the Council of Financial Regulators with a competition mandate and ensure that it regularly reports on competitive dynamics and also to require the Council of Financial Regulators to consider and report on Australia's competitive position. The committee also supports self-regulation where innovative products emerge whilst ensuring strong consumer protection. We have used the example of buy-now pay-later products as a positive innovative development which should be supported by a system of co-regulation. We were not convinced that the way to promote innovation in Australia was to force new ideas into old frameworks designed for something altogether different.

An important regulatory reform that is underway to encourage more competition is the consumer data right. The committee considers that a single standalone body is required to manage this reform, particularly as it is rolled out into other sectors in the economy. The CDR is too important to be managed by a wing in the ACCC.

On to capital: evidence received showed the critical role of capital in facilitating the growth of fintech and regtech businesses. The committee has recommended that the Early Stage Venture Capital Limited Partnerships program and the early stage innovation company tax incentive be reformed. The committee heard that these programs require tweaking in order to reach their full potential and be globally competitive.

The committee also recommended that the remaining Johnson review recommendations from 2009 be implemented. If we are to have a serious prospect of beating Singapore in winning business from the ailing Hong Kong, we must enact these reforms as soon as possible.

On to skills, talent and culture: the committee made recommendations across these areas. The committee recommended that the government work with industry to ensure the reskilling of workers affected by economic change and ensure the availability and accessibility of microcredentials for those seeking to join the fintech and regtech sectors. It should also explore the option of including eligible outplacement training under the FBT exemption for eligible startups.

The package of recommendations brings together many loose ends and turns them into a package. The committee will continue to engage with the sector as it moves into the next phase of the inquiry. Just like our fintechs, the government should be iterative and responsive as we undertake our work as a parliament.

A positive disposition is the one thing that is required to be successful in this space. But the next thing is to have a plan to be competitive. The plan to be competitive in fintech is the same plan that Australia requires to be competitive in technology and across the board. The fundamental need to be competitive is the same as it was before the pandemic. The need for reform is now more acute because we are in a recession and competing globally for new investment and new people. We have the brains. We have the skills. All we need to do is unlock our technology prowess by breaking down some barriers.

We should thank the other members on the committee for their interest, engagement and collegiate approach and note that the vast majority of recommendations in this report are bipartisan. I want to thank the deputy chair and fellow millennial, Senator Marielle Smith, and committee members Senator Paul Scarr, Senator Susan McDonald and Senator Jess Walsh for their support in the compilation of the report. I also wanted to thank the committee secretary, Lyn Beverley, for her commitment and guidance over the past year, and acknowledge the father of fintech in Australia, the Prime Minister, Scott Morrison, who has been a champion for fintech since his days as Treasurer, when he set the ball rolling in this space. The PM established the consumer data right, opened the fintech bridge with the UK and led reforms on the early-stage innovation companies as part of the National Innovation and Science Agenda.

The government is full of fintech supporters, I should say: the Treasurer, Josh Frydenberg, and Australia's first fintech minister, Jane Hume. They are a great team, and I'm proud to serve alongside them. I hope these recommendations will be adopted by the executive government and I look forward to presenting the committee's final report in April.

I seek leave to continue my remarks later.

Leave granted.

Marielle Smith (SA, Australian Labor Party) Share this | Link to this | Hansard source

[by video link] The tabling of this report provides our parliament with an update on our committee's work in relation to its inquiry into the financial technology and regulatory technology sectors. The aim of our inquiry was to identify the challenges and barriers Australian fintechs and regtechs are trying to overcome in attempting to grow their enterprises and their respective industries. It's been a brilliant experience being part of this committee, and I want to start my remarks by thanking the chair, Senator Bragg, and also Senators Walsh, Scarr and McDonald for their keen participation in the hearings and the deliberations of our committee. I also want to thank the committee secretariat, particularly Lyn Beverley and CJ Sautelle, who have been instrumental in ensuring the inquiry's processes have run as smoothly as possible during these unprecedented times.

Whilst we weren't able to reach agreement on absolutely everything in this report, we did all come into this process in good faith, and I'm pleased that there was so much that we could agree on within the interim report. That said, I do need to address some of the issues where there were discrepancies in our opinions, and I'll get to those shortly.

Throughout our hearings we heard from many fintechs and regtechs about the innovation products they've brought to market in Australia as well as the challenges and opportunities facing this sector going forward. I was especially pleased to hear from fintechs in my home state of South Australia, having been an advocate for the further development of this sector and the jobs it could bring to Adelaide.

The inquiry identified many challenges that Australian fintechs and regtechs are confronting and which have only been exacerbated during this pandemic. These challenges aren't insurmountable for the sector, but they do require action from our government. Whilst there has been significant focus on regulatory settings that require modernising to keep up the pace of exciting regulatory and financial products, there are many other challenges ahead. Evidence to this inquiry has brought to light many of the issues that traditionally plague the startup sector, including a lack of access to capital as well as access to skills. Notwithstanding these challenges, according to KPMG, the fintech sector in Australia is already worth about $1 billion, but I am certain that much greater growth is possible here as well as in the regtech industry, and with that growth comes growth in jobs if the government can get these settings right.

As we know, the economic crisis caused by the pandemic has been difficult for all businesses and their workers, but there have been particular challenges for fintechs and regtechs, many of which are at the prerevenue stage of development. The committee resolved to alter its reporting date, as Senator Bragg has said, and shift its focus so that the interim report tabled today would cover off some pandemic related topics as well as look at the other evidence which was provided to our inquiry.

The pandemic, it must be said, has also brought up different opportunities for the use of innovative technologies, and some of the recommendations in our interim report reflect these developments. There was bipartisan support for the universalisation of telehealth and e-prescriptions as well as options to have videoconferencing at annual general meetings under the Corporations Act. It should be noted that we couldn't agree on whether companies should be compelled to provide a hybrid model to allow both in-person and virtual AGM meetings. It's my strong view individual shareholders who wish to opt in to in-person services should be able to do this. This is important for issues related to the digital divide and it's important to ensure the fair participation of older and regional and rural shareholders or shareholders with disability.

Throughout the inquiry's proceedings to date, I've been mindful of the need to always balance the desire to encourage growth in our fintech and regtech sectors whilst protecting the interests of Australian consumers. Of course Labor wants to see these industries flourish in Australia, but it is crucial to ensure that innovation and growth do not come at the expense of consumer outcomes. That principle has been Labor senators' guiding approach to this inquiry. While it was conducted in a collegial and effective manner, with most recommendations receiving bipartisan support, there were some recommendations that either required further clarification or simply could not be supported in this regard. We have indicated this in our dissenting report because it is our firm belief that consumers must not be left behind.

In particular, the government has a responsibility to ensure the financial literacy needs of everyday Australians are keeping up with the availability of more financial products. Evidence to the inquiry suggested that there aren't many of these types of education programs currently in place in our community. This only serves to further disenfranchise vulnerable groups of Australians, and it will only further widen the digital divide which exists within our community with respect to those who have access to and understanding of technology and those who don't.

Labor senators acknowledge that innovation in the financial technology space is an exciting development for the Australian economy, including for consumers. However, its true potential will only be realised if its availability results in a narrowing of the digital divide. The Prime Minister and this government claim to be champions in this space, but what this inquiry has shown is that there is plenty of work ahead for the government to do if the fintech and regtech sectors are to reach their true potential. The implementation of many of the recommendations in this report would provide a good starting point.

There is plenty of work ahead, and there's plenty of work ahead for our committee as well. I'm afraid I probably won't be around for the next part of the research project of the next committee as I will be leaving on maternity leave in a number of weeks, but I wish the committee members, the chair and Labor senators well in the further development of this work.

These are such important sectors. The fintech and regtech sectors offer incredible opportunity to Australia, and they offer incredible opportunity in Adelaide and throughout South Australia, which is of the highest importance to me. So I hope that together as a parliament we can do what we can to make sure that these sectors flourish and that we see more jobs grow from them. I hope also that we make sure that those people who may not be able to keep up with this technology, who face disadvantage through the access to it or who find the increased choice or reduced choice that may emerge from some of these technologies are looked after. I hope that consumer outcomes are looked after and that, as we are looking to support this sector and support growth and opportunity, we are also looking to ensure that no Australians are left behind.

All of that said, despite our obvious policy differences in some areas, I think members of the fintech and regtech sectors can be assured that in the members of our committee they have found champions in the parliament and in the Senate. I hope that gives them comfort that there are plenty of people in this building who understand what it is that their sector presents in terms of opportunity to our economy and to consumers and that we're looking to make sure that it can develop in a way which is beneficial to the majority of Australians, particularly those Australians who stand to benefit from better consumer outcomes.

Question agreed to.