By Scott Morrison
At the recent World Economic Forum it was noted that 90% of the data we use today has been created in the past two years.
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 its 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.
Scott Morrison is the federal Treasurer.