Ladies and gentleman, it’s a privilege to be speaking at the AFR’s Banking and Wealth Summit – the first event in its inaugural National Policy Series. For over 50 years, the Australian Financial Review has been a leading source of independent news and commentary on the financial sector. And, I think forums like this provide an important venue to discuss the big issues confronting our sector. I congratulate Michael Stutchbury and his team for putting this event on.
My topic today is – Harvesting the opportunities from financial innovation: How can ASIC help you? The key to harvesting these opportunities is investor and financial consumer trust and confidence.
In exploring how we do this, I would like to talk about:
ASIC’s role in creating trust and confidence
the challenges to trust and confidence, and
how ASIC will respond to the challenges created by digital disruption and financial innovation.
ASIC’s role in creating trust and confidence
So, what is ASIC’s role in creating trust and confidence? ASIC’s fundamental objective is to allow markets to fund the real economy and in turn economic growth. This contributes to improved standards of living for all Australians.
For markets to do their job, investors need to have trust and confidence in them. Without it, you don’t have a market. Making sure Australians have trust and confidence in our markets is at the heart of everything we do and is reflected in our twin regulatory strategic priorities of:
investor and consumer trust and confidence, and
fair, orderly and transparent markets.
Our first strategic priority has three areas of focus:
Education: investor responsibility for their own financial decisions remains core to our free enterprise system. We empower investors and consumers through our financial literacy work conducted under our MoneySmart brand.
Gatekeepers: we hold gatekeepers – such as directors, advisers, auditors, product manufacturers, market participants and stock exchanges – to account. – ASIC is a law enforcement agency, first and foremost. – 70% of our regulatory resources are devoted to surveillance and enforcement.
Lastly, consumer behaviour: we recognise how consumers really make decisions and look to apply insights from behavioural economics in our work.
Our areas of focus for our second strategic priority – fair, orderly and transparent markets – are:
our role in market supervision
surveillance of market conduct, and
our corporate governance work.
Challenges to trust and confidence
For my second topic, I’d like to outline the challenges we see to trust and confidence in our markets. At ASIC, our focus is on being proactive and forward looking to help manage these challenges, which are:
getting the right balance between a free market based system and investor trust and confidence
digital disruption to existing business models and channels, which we will talk about later
structural change in our financial system through: – the movement of savings from the banking sector to the superannuation sector, and – the growth of capital markets driven by the growth of superannuation
financial innovation-driven complexity in products, markets and technology – much of this is driven by the digitisation of our economy, and
globalisation, which also affects: – products – markets, and – technology.
Responding to challenges created by digital disruption and financial innovation My third topic and focus for today is how ASIC responds to our challenges – particularly the challenges presented by digital disruption and financial innovation-driven complexity from technology.
I’d like to focus on three areas:
digital disruption
cyber resilience, and
ASIC’s innovation hub.
Digital disruption At this moment in history, the time is ripe for disruption. Drivers for this include the fact that:
today’s technology is yet to fully make its impact on our financial services and markets
investor and consumer trust and confidence in some sectors is low and they are looking for a better deal, and
investors and consumers are becoming more empowered through social media.
The great drawcard of digital disruption is the opportunity it brings. Digital disruption offers:
new forms of access
greater competition, and
greater efficiency.
It provides business with new ways of creating and sharing value with their customers. For example, think of the potential of:
digital currencies
peer-to-peer lending, and
robo-financial advice.
I consider that the businesses that will end up succeeding – from both the incumbents and the disruptors – will be those that provide a sustainable demand-driven offering, which puts the customers’ interests at the core of what they do – that is, those businesses which have a culture that emphasises the best interests of their customers.
