The Murray Inquiry’s Final Report strongly endorsed facilitating innovation in the financial services industry and technology neutral approach to regulation of financial services providers.
The Report recommends the establishment of a permanent public–private sector collaborative committee, the ‘Innovation Collaboration’, to facilitate financial system innovation. This is similar to the ‘Innovation Hub’ initiative by the UK’s Financial Conduct Authority (FCA) established earlier this year, indicating that a close monitoring of UK developments will provide valuable insights into the future of regulation in Australia.
Following the lead of the UK regulator, the Report recommends the facilitation of innovative forms of disclosure, noting consumer behavioural biases and commercial disincentives currently limit the effectiveness of our current disclosure regime. While the Report is scant on detail, it is echoing the consistent need for reform to facilitate innovation in financial services.
The Report acknowledged that some of the key considerations and trends in using technology to promote innovation in financial services include the increased tendency by consumers to self-service and self-educate, the use of big data analytics, cyber security issues and frictionless mobile payments.
Consistent with recent ASIC announcements, the Report also clearly endorses the principle of “technology neutrality” in the regulation of financial services. It is encouraging that the reform dial is moving in the right direction but the proof is in the pudding as it is not just about allowing electronic delivery. Regulation needs to adjust the bias away from paper, page and document type formats to facilitate the use of interactive multi-media that could personalise engagement with customers and allow the disclosure to be adaptive for use with all types of mobile devices.
Such reform should result in significant cost savings for financial services providers, as well as improving the customer experience and reduce the risk of mis-selling.
However, much depends on the regulators and how facilitative they are prepared to be. The Report recognises that the regulators need to adopt a flexible approach to respond to future developments in the market and technology. This means the regulators may need more resources and potentially new and different skill sets, in order to quickly identify both the opportunities and risks that new technology poses for financial services providers and consumers.