As the primary regulator of the financial sector, the Commonwealth Government plays a key role in influencing the sector;
It has now been four months since the Government was returned, and the agenda for the next three years is taking shape in areas such as ongoing reform of the regulators, implementing the consumer data right, reviewing card payments regulation and the policy settings for fintech;
With the appointment of Senator Jane Hume as Assistant Minister for Financial Technology, fintech now has a dedicated Ministerial portfolio.
POINT OF VIEW
The financial sector, including payments, is regulated by the Commonwealth Government. Political direction at the federal level therefore sets the regulatory direction for the payments industry and is a key driver of business outcomes.
The May election returned a majority Liberal-National Coalition Government. While the Government regained a majority in the House of Representatives, it will still need to work with crossbench Senators to pass legislation.
The election brings some new faces to the economic portfolio. For the first time, Australia will have an Assistant Minister for fintech, with Victorian Senator Jane Hume taking on the portfolio of Financial Technology as well as Financial Services and Superannuation.
The return of the incumbent government means that no further significant changes to economic policy are expected. Instead, the Government will continue to progress along the lines set out before the election. Key priorities within the financial sector over the next three years include:
Ongoing reform of the regulators themselves;
Implementation of the consumer data right (CDR);
Reviewing the regulatory settings for card payments; and
Further examination of the policy settings for fintech.
Reform of the regulators will continue:
Both the Productivity Commission (PC) and the Royal Commission found Australia’s financial sector regulators in need of reform.
The PC recommended that the Australian Competition and Consumer Commission (ACCC) take a more active role as the “Competition Champion”. Previously a number of bodies had been charged with this, which often effectively resulted in none taking ultimate responsibility for it. To this end, the Government has funded a financial services unit in the ACCC.
Commissioner Hayne stated that regulators have been too collaborative with the organisations under their supervision and too unwilling to take enforcement actions in the courts. In his final report, Hayne called for regular capability reviews and information sharing between the regulators.
Whatever shape reforms take, we can expect additional oversight and accountability for both the Australian Prudential Regulation Authority (APRA) and the Australian Securities and Investments Commission (ASIC) as we see them take a more aggressive approach to enforcement in court.
Consumer Data Right (CDR):
The re-elected Government will continue to target February 2020 as the start date for the CDR, and the enabling legislation has now passed Parliament without amendments. However, Labor sought and received a commitment that the Government will legislate for a “right to delete” (RTD). These amendments will be considered during the Spring Sittings of Parliament as a separate bill.
The Government is now beginning to roll the CDR out in other sectors, with the ACCC releasing a position paper on a data access model for the energy sector.
Card payments regulation:
The Payments System Board (PSB) will commence a new Review of Card Payments Regulation in early 2020. The PSB has undertaken these reviews on a semi-regular basis since the early 2000s, most recently in 2015-16. The most recent review made key decisions relating to interchange and surcharged – for example, changes to the weighted-average interchange fee benchmark for debit cards and the introduction of a concept of a “permitted surcharge” based on the merchant’s average cost of acceptance.
The inquiry is expected to last over a year and may examine similar issues to earlier reviews.
Fintech policy focus:
Finally, the Senate has voted to establish a bipartisan Select Committee on Financial Technology and Regulatory Technology. The inquiry will be quite long, with the final report due in October 2020. Parliamentary Committees are run by backbench Parliamentarians (rather than government departments) and therefore look at issues through a political lens rather than at policy detail.
Among other things, the terms of reference include the following areas for examination:
The size and scope of the opportunity for Australian consumers and business arising from financial technology (FinTech) and regulatory technology (RegTech);
Barriers to the uptake of new technologies in the financial sector; and
The effectiveness of current initiatives in promoting a positive environment for FinTech and RegTech start-ups.
As with the earlier House of Representatives Inquiry into the Four Major Banks (the Coleman Inquiry), the new Senate inquiry may be influential in determining the direction of government policy.