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Thursday, 6 February 2020
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Senator McALLISTER (New South Wales) (11:31): I rise to speak on the Treasury Laws Amendment (2018 Measures No. 2) Bill 2019. Labor support the objectives of the bill. We support the establishment of a fintech sandbox to provide some regulatory relief when needed to allow innovative products and services to be brought to the market. However—and this is an important caveat—there must be adequate protections and genuine benefits for consumers. A regulatory sandbox is a closed testing environment designed for experimenting with web or software products and, in this case, a financial product or service. A sandbox provides some level of flexibility in relation to regulatory standards.

Financial technology is already a significant industry in Australia. Ernst & Young have estimated that 58 per cent of digitally active Australians are already using financial technology in their lives. We are early adopters of all sorts of technology, and it is no different in the area of fintech. Generally, we see fintech and Australian firms active across the five different areas: transfers and payments; budgeting and planning; savings and investment; borrowing and lending; and insurance. They're widely disparate areas, and the technologies that support them are disparate, but Australians generally welcome innovation where it leads to better outcomes for them.

In December 2016, ASIC launched Australia's first sandbox. After just over a year, there were only three entities using the sandbox and 15 in the pipeline. Over a similar period, the UK had 50 entities from 146 applications, Singapore had 30 applications, Malaysia had seven in the first six months and Hong Kong had nine entities use the sandbox for 11 trials. The low number of applications in the Australian context suggests that we're not doing it right. There is something not quite right, and there is a need for reform. That is why we support the objectives of this bill.

We want to see a flourishing and expanding financial technology sector in Australia. We support the establishment of a fintech sandbox to provide some regulatory relief when needed. However, as I said at the beginning of my remarks, there must be adequate protections for consumers. The framework should be used by start-ups who are genuinely seeking to deliver something innovative and who provide a clear consumer benefit.

Innovation, of course, can produce significant benefits for consumers. However, not every product innovation is necessarily in the consumer's best interest. That is particularly the case in complex markets such as financial services where the risks of bad product design can have catastrophic consequences. For example, we've recently seen some very important innovations, as they might be described, by payday lenders. It's led to more online targeting; sophisticated microtargeting, in fact, of consumers; and quick loan applications for high-cost debt.

Consumer advocates like CHOICE raised concerns around consumer protection back in 2016 when the ASIC framework was introduced, and these concerns remain. That's why Labor will be moving amendments to this bill. Our amendments aim to ensure that access to the regulatory sandbox is limited to firms that are applying for genuinely innovative operations. Our amendments seek to ensure that companies accessing regulatory relief through the fintech sandbox must show that they are using it for products and services that are genuinely innovative but also that will actually benefit customers. Our amendments seek to safeguard the very purpose of providing a sandbox and ensure that the public interest is clearly established when this sort of regulatory relief is provided. We do wish to encourage firms to innovate. We do not wish to provide a backdoor for firms to avoid regulations that would apply to the rest of the industry.