The Australian Securities and Investments Commission (ASIC) has released its corporate plan for 2016-17 through to 2019-20, highlighting the role of innovation in both helping it achieve its various objectives and the challenges technology may pose.
The corporate plan will cover ASIC’s regulatory objectives of promoting investor and consumer trust in looking at how products created by fintechs drive innovation and globalisation in local and international financial markets.
The report has uncovered that while a focus on particularly fintechs is important is has also stated that “innovation has the potential to offer many benefits, it may also bring risks.”
Key risks for both this year and next include digital disruption, cyber threats, cross-border businesses, services and transactions, gatekeeper culture and conduct in markets and financial services, and the misalignment of retail product design and distribution with consumer understanding.
“The increasing use of technology for financial decisions and transactions means financial firms and regulators alike need to ensure innovations in distribution and marketing enhance, rather than undermine, investor and consumer decisions and outcomes. Testing and monitoring is key to understanding the benefits and risks of innovation. We should all help manage these risks while enabling the benefits of innovation to flow through the system.”
Looking at innovation too, ASIC acknowledged that industries such as insurance are beginning to recognise the opportunities stemming from data analytics. However as products and services become more tailored there is a risk that consumers may not understand them, or will be unable to adequately compare them to alternatives.
To answer these challenges and growing concerns ASIC will try to detect, understand, and respond, enhancing its own technology systems, data management, and analytics capabilities to gather and understand insights.
In the last few months ASIC has proposed and put into place a couple of significant measures to help facilitate fintech innovation. The body has said it will now look to engage with a range of individual firms, stakeholders and government bodies to minimise risk and drive innovation.
To minimise risk faced by fintech startups entering the Australian market, ASIC has proposed the creation of a regulatory sandbox. The sandbox looks to help lower barriers to entry faced by fintech startups by allowing them to test their concepts and products in a safe regulatory environment to determine whether their ideas are viable.
Earlier this year ASIC also entered into a partnership with UK’s Financial Services Authority (FSA), with the partnership to allow fintech companies to more easily expand into the other country.
Image: John Price, ASIC Commissioner. Source: YouTube.