ASIC: Fintech will be both a challenge and risk in 2017-18
The regulator's corporate plan said digital disruption "warrants attention" over the next 12 months.
The Australian Securities and Investments Commission (ASIC) has released its corporate plan for 2017-18 to 2020-21 and has identified digital disruption as both a long-term challenge and key risk to its strategic vision.
ASIC has been a big supporter of fintech over the past 12 months, a focus it identified as part of its 2016-17 corporate plan.
The regulator has entered into a number of cooperation agreements with overseas regulators including Hong Kong, Japan, Abu Dhabi and Kenya. It also took a steadfast position to facilitate and support fintech rather than trying to overregulate new market entrants.
"Financial technology (fintech) continues to grow and evolve," the corporate plan said.
"Australian fintech investment grew strongly to US$656 million in 2016, from US$185 million in 2015. Australia ranked fifth out of 20 global markets for fintech adoption, with 37% of the digitally active population using fintech services."
Some of the risks arising from fintech were identified as follows:
- Consumers not understanding what they were buying due to streamlined consumer engagement processes
- Increased market fragmentation and complexity
- New products and services testing regulatory boundaries
- Cyber threats
To combat the risks of digital disruption and ensure consumers gain its full benefits, ASIC has outlined an action plan that will lead it into 2020-21.
"Over the next four years, we will focus on facilitating innovation to enable investors and consumers to benefit from fintech, while managing the risks to trust and confidence and market integrity from digital disruption.
"We will help fintech businesses navigate the regulatory framework through the Innovation Hub. In addition, we will engage with the local and international fintech community, regulators and other bodies to keep abreast of developments."
To mitigate risks of digital disruption, ASIC will monitor the following:
- Emerging technologies, promotional methods, delivery channels and business models
- Market misconduct that is facilitated by or through digital means
- The impact on financial reporting and audit quality
ASIC Chairman Greg Medcraft said, "The financial sector continues to evolve, driven by demographic and structural change, globalisation and technological advancements. As always, changes may challenge trust and confidence and market integrity. However, if changes are well-managed, they can also enhance the financial wellbeing of all Australians."