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Monday, 10 February 2020
Page: 593

Senator SHELDON (New South Wales) (20:37): I rise in support of the Treasury Laws Amendment (2018 Measures No. 2) Bill 2019. This amendment bill is about how we nurture the next generation of innovative new financial products and services. But financial products and services don't exist for their own benefit; they are there for the people they serve and ideally will evolve for the benefit of all Australians. That is what is at stake in this bill. These new financial technology services will be an important part of our economy this century, not least for their ability to bring some much-needed competition to the financial sector as a whole. We want these companies to be able to show that they are genuinely innovative. We want them to show that they can bring real benefits to the Australian public.

After the horrors of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, almost everyone in Australia understands that big banks could do with a little bit more competition. But importantly—and I want to stress this—this additional fintech competition must come with a healthy dose of regulation as well. The need for a better-regulated industry was in fact the most important thing to come out of the hearings and the heartbreaking testimony of individuals, families and businesses who fell victim to the greed and shoddy practices of banks and other financial institutions in Australia. Without the right regulation, financial services can quickly morph into weapons of mass destruction.

Unfortunately, we seem destined to have to relearn this lesson. Let's not make the mistake again as a new era of fintech rolls out in Australia and around the world. No matter how you purchase or experience a financial product or service, offline or online, there need to be proper rules and protections for consumers. Consumers have the most important thing at stake, other than their lives, and that is their financial security and dignity. That brings us to this bill and the amendments being supported by Labor. I should say that it is not often that a senator goes to play in the sandbox—actually, in Australia we play in the sandpit, but you understand what I mean. The sandbox I'm referring to is of course the so-called regulatory sandbox which is set up whereby new financial products are beta tested. The regulatory sandbox essentially allows for these new products to be refined and stress tested before they go to market with a certain amount of regulatory flexibility so that the best product can be devised.

Labor supports this beta-testing environment, and we support the development of fintech products. There are huge opportunities here for the Australian start-up sector, for businesses generally and for individual consumers to assess a range of financial products specially designed for their needs. Labor wants to see an energetic and homegrown fintech industry that can create the products that will support the personal and business goals of individuals, families and companies. Already, more than half of Australians are active online in some form of financial technology and this is growing every day. I'm talking about fintech products that enable savings and investment; fintech products that enable payments and fund transfers, borrowing, lending and insurance. This is a huge range of different services. But we are also mindful that regulation in the most critical area of the economy is a no-brainer. It is our role as a parliament to look beyond the shiny and the new, to ensure that consumers are protected and that we can benefit from the incubation of this important new industry. This is why I stand to support this bill and the sensible amendments to it.

Innovation can really deliver for Australian consumers, but not every shiny new financial product is going to be in the best interests of consumers. Complicated financial products which are difficult to compare, or products designed to prey on those with few resources and little money, can be a safety risk. These should be subject to the best regulation we can devise. This bill will also give the regulator, ASIC, the powers to provide consumer protection benefits. We should note that these increased powers may require greater capacity. It is appropriate that ASIC is funded so that it can properly oversee the financial sector and this new emerging fintech sector, with all of its innovations and complexity.

The banking royal commission laid bare for us all the terrible human and business costs of financial products and services when they are not regulated properly. Technology can be a multiplier effect on these risks. We have seen the rise of predatory payday lenders and consumers targeted for new financial products online which are little more than a scam. We saw an example recorded in November last year from a Ms Kirsten White, who lives in Kingston on the outskirts of Hobart. She urgently needed $350 and went to a payday lender. She needed that money for a car repair, a basic tool for looking after her family. She said, 'I was under the impression that the payday lender was quite flexible with repayments.' However, her $350 spiralled into an $800 debt within half a year. Ms White believes the lender was deliberately vague about interest rates and that she was taken advantage of financially. John Cooper from Tasmania's No Interest Loans scheme talked about payday lenders who were charging 400 per cent, which of course is outrageous. He said that needs to stop. But, unlike this bill, the federal government announced plans to tighten laws around small consumer loans and leases in 2016 following a review of the sector. We are now at the beginning of 2020 and there is no legislation dealing with these matters appropriately.

To talk more about this particular bill in front of us: we have to take into account the fact that the government also has more work to be done. We need to stay vigilant, no matter how a financial product or service is delivered. We know that vulnerable groups in our community, including older Australians, people already in debt or those struggling to pay the bills from week to week, are especially at risk. Since ASIC launched Australia's first fintech sandbox in 2016, even the fintech industry itself has been persuaded by the need for better regulation. Labor will move amendments to this bill so that companies who want to access this regulatory relief must demonstrate that they are using it for products and services that are genuinely innovative and that the innovation offers a good prospect of identifiable benefits to consumers either directly or because it establishes better competition.

The message of this bill is that fintech firms who want to use this great regulation to test their products and make money while benefiting consumers should have that opportunity. I also note that regulatory sandbox rules very similar to those embodied in these amendments are present in other jurisdictions around the world that are leaders in financial technology. This includes Hong Kong and Singapore, in our region, and the United Kingdom as well. So Australia should not hesitate to follow their lead when consumers need to be protected and innovation encouraged.

Meanwhile, other experts, including the local fintech sector, are also supportive of the reforms that Labor is putting forward. In their submission to the Senate inquiry into the bill, FinTech Australia, which represents the financial tech industry, also supported reforms that ensure only the right companies can take advantage of this regulatory sandbox. Consumer advocates Choice have also raised concerns. Labor believes that these concerns must be addressed by these amendments before the bill is passed by the parliament. To bring on innovation and to bring on the enhanced competition that the emerging fintech sector promises, we want to encourage firms to innovate. What we don't want is a system where regulation protecting consumers and businesses is watered down and undermined.

Enhanced competition must go hand in hand with enhanced regulation. This is a sensible bill that supports an important emerging industry and supports the rights and expectations of consumers and businesses—expectations that have rightly arisen since the banking royal commission told us the dirty truth about how exploitative and greedy some people in our financial institutions can be. The Hayne royal commission told us some powerful lessons on how not to structure and regulate our current financial sector. We have the opportunity to get the settings and regulations right with this new financial sector.