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Opinion piece: How FinTech is enabling the successful transition of our economy



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10 March 2016

Media Release

‘How Fintech is enabling the successful transition of our economy’, Opinion Piece, Australian Financial Review

At the recent World Economic Forum it was noted that ninety per cent of the data we

use today has been created in the past two years1.

The ability of new technology to capture and process data, in real time, is changing how

business is done, how products and services are conceived in the new economy and the

way consumers participate in this process.

Financial technology - or FinTech - is lubricating this transformation. The catalytic

impacts of Fintech and it’s potential to unleash a new era of competition, innovation and

job creating productivity in our economy is inestimable at this point, and very worthy of

encouragement.

FinTech is not just about digitising money, it’s about monetising data. It’s about how we

can create and capture the value add from data, previously limited by the technology we

had available. It is the second round value surge that is now starting to flow from an

increasingly digitised economy.

Financial services providers now talk about attributes, or insights into consumers, not

just in the tens of thousands but in the hundreds of thousands and millions.

Businesses and authorities now have structured access to almost unlimited data,

especially with the advent of social media, that sophisticated algorithms can quickly

interrogate and transform into new services and products.

This is not old-style data mining but deep learning that permits previously unimagined

insights and information that in turn allows more individualised products and services,

and more efficient markets and systems.

Much of this is taking place outside the official sector, as traditional regulation was built

for a different time.

It is this positive disruption that a successfully transitioning economy, like Australia,

can and must benefit from and why the Turnbull Government is now taking such a keen

and close interest as part of our innovation agenda.

Just as the Internet has empowered people around the globe through access to

information, financial technology is reducing information asymmetry in the

marketplace and thereby helping to mitigate risk and promote more efficient allocation

of scarce resources.

At the launch of my FinTech advisory group chaired by Stone and Chalk Chairman,

Craig Dunn, the industry pioneers who are forging this new sector have been advising

me about the enormous potential of new technologies in financial services to better

manage risk in the financial system.

More digitised transactions support greater audit capability, transparency in payments

systems and security in transactions by reducing risks you are also reducing the need for

regulation. In this world, de-risking and de-regulating an environment actually go hand

in hand.

The frictionless operation of FinTech innovations such as blockchain and digital

currencies are generating new value streams not just in financial services but across the

economy.

Whilst in Shanghai recently for the G20, Lufax, the second largest peer-to-peer lender in

China, told me about real time personalised insurance options such as car insurance

that could account for the places you might be driving through or to on a particular day,

including weather and traffic conditions, .

The disintermediation of the market will also be accompanied by greater “Fintegration”

- or collaboration in financial services - between disruptors and others.

In Shanghai I also spoke to the Chinese internet services giant Baidu, who refer to their

“Internet plus” strategy. Baidu see it not as their job to become a fintech operator, but to

act as an aggregator, bringing together the partners needed to realise a new product or

service to fill the gaps and satisfy demands that they see can be realised by leveraging

their digital distribution networks, data and insights.

As financial services become more globalised and technological disruption more

prevalent, Australia needs to keep pace with innovation in banking and finance to stay

competitive, and regulators and Governments have to play their part.

This not only means ensuring our regulatory processes do not suffocate these

developments, but also utilising our significant procurement power to enlist fintech to

solve problems that Government’s need solving.

As Treasurer I know Australia’s FinTech sector can play a vital role in aiding the positive

transition that is occurring in our national economy.

There is also an enormous opportunity in our region for Australia’s financial services

exports. Growing our FinTech capabilities will position Australia to seize new

opportunities from the transitioning economies of our major trading partners, especially

China.

Competition policy and microeconomic reform will also be accelerated by innovations in

FinTech, especially in payments systems, and the ASX has already announced that it is

seeking to introduce blockchain technology for its settlements process.

Fintech can also help drive improvements in traditional financial services and promote

disruption through innovative new products and services, which can offer benefits to

consumers and other sectors of the economy

That’s why we’re working with FinTech to prepare our financial system and economy for

the future and why it is such an important part of our plan to manage our transitioning

economy.

1 http://www.weforum.org/agenda/2016/01/how-to-survive-and-thrive-in- the-fintech-

revolution