Technology and innovation can be ‘game-changers’ in financial services, and now the Government has shown that it recognises this opportunity as well.
While the technology and innovation parts of the Government’s response to the Financial System Inquiry won’t get as many column inches as the recommendations directly addressing banking and superannuation, they are every bit as important.
The FSI’s technology recommendations in a nutshell are:
“The [Government’s] innovation measures will unlock new sources of finance for the wider economy and support competition.”
The Government will:
- Update the Cyber Security Strategy
- Establish a public-private sector Innovation Collaboration committee
- Develop a National Digital Identity Strategy
- Improve the use of data
- Adopt the principle of Technological Neutrality
- Facilitate innovative product disclosure
The Government’s response released this week says that it is positioning itself with the ‘disruptors’ in relation to new payment methods, better use of customer information and other data and the establishment of trusted digital identities – and that it wants to get rid of blockages.
Some of their measures of success will be in removing legislative obstacles to innovation; ensuring that Government agencies have a sufficient understanding of technological capabilities, limitations and risk; getting these agencies to work together in an efficient and consistent manner; and being informed about what’s happening around the world and in the Australian private sector.
The establishment of a public-private Innovation Collaboration Committee is a step in the right direction. Its purpose will be to help emerging firms and start-ups with an entry point to Government. This will need to be simple, straightforward and streamlined to ensure that it doesn’t just become another layer of bureaucracy.
The commitment to technology neutrality is another positive. Technological neutrality provides the freedom to choose the best technology for development and use, without having to worry about or be locked into specific technology required by regulations – or worse, being required to use outmoded technologies.
I conducted an audit of the business cards in my suit pocket and can reveal that eight out of the ten cards still contained a fax numbers, despite fax machines generally gathering dust in dark corners of most offices – if they still have them. This may be merely quaint but a requirement to send documents by fax or post locks in an outmoded means of communication and gets in the way of developing better, more efficient technologies.
These roadblocks are commonplace in superannuation and financial services, and need to be addressed as a priority. There are overlaps in the data provided to APRA and the ATO, and many more efficiencies can be introduced into the way data is reported, and the learnings from SuperStream and Standard Business reporting can be adapted for a range of expanded purposes.
The Government is going to task the Productivity Commission to examine broadening access to and use of data, so that organisations can identify new opportunities, develop innovative products and lower costs. I hope this process will also remove obstacles to efficient use of data in a way that serves the best interests of customers. While this needs to provide privacy protection, it must also do so in a way that is useful and meaningful for consumers.
One of these initiatives will be started this year – together with the review of Cyber Security Strategy – and is the Productivity Commission review into the use of data. The Innovation Collaboration Committee will be started in the middle of next year, and the technology neutrality in financial sector regulation will further be considered from the end of next year. And the timetable for the development of a Trusted Digital Identity Framework is yet to be confirmed.
One thing that is certain is both better use of data and the lack of technological neutrality are crying out for urgent action. Super funds are in a prime position to provide the Government with examples of the inefficiencies they face in their operations and their interactions with regulators, and show how these get in the way of providing a better member experience.
This Government is committed to the reduction of red-tape and these issues provided plenty of. As super funds improve Straight Through Processing, complete implementation of SuperStream, and introduce increasingly sophisticated data analytics, there are many opportunities for productive partnerships that can benefit from the Government’s renewed focus on improved technology and innovation outcomes.
David Haynes is Executive Superannuation Policy Advisor at IQ Group and is a member of the Structural and Thought Leadership Group.