FinTech Awards for delivery 7pm, 19th November 2020
The global pandemic has changed many things about the way we do business.
Not least of which is financial technology.
But the good news is that FinTech, and particularly Australian FinTech, is well poised to take advantage of the predicament.
So tonight I’d like to cover some of the contents of The FinTech Report, Australia as a global financial centre and how the Federal Budget will accelerate change for the better in your sector.
I’d like to begin by dispelling a myth.
It is simply not true that technology destroys jobs, on the contrary, it’s jobs accretive.
I am currently Chairing a Senate Select Committee Inquiry into Financial Technology and Regulatory Technology.
We’ve been running just over a year and recently tabled an Interim Report with a view towards wrapping up around April next year.
I am very positive about what we’ve found and where we are headed.
I am optimistic about new jobs underpinned by technology.
“Most jobs created by technology are outside the technology-producing sector itself. We estimate that the introduction of the personal computer, for instance, has enabled the creation of 15.8 million net new jobs in the United States since 1980, even after accounting for jobs displaced.”
With job creation front of mind we made 32 recommendations when I tabled the report in September. The vast majority of them were agreed to with bipartisan support.
More encouragingly, Federal Treasurer Josh Frydenberg delivered a short turnaround time to include some of our recommendations in his Federal Budget last month (October).
Research and Development
In our report we made 2 recommendations directly related to tax incentives for Research and Development, and the Treasurer delivered.
a.) That the Australian Government provide further clarity around eligibility for the Research and Development Tax Incentive to ensure genuine software creation by Australian startups is reliably supported.
b.) That the Australian Government provide increased certainty around claiming the RDTI through issuing guidance in conjunction with the ATO.
Thanks to the Budget, Australian businesses will get $2 billion in tax incentives to boost R&D.
It means that many more companies will be able to access the R&D tax credit.
For small companies with an annual turnover of less than $20 million, the refundable R&D tax offset is being set at 18.5 percentage points above the claimant’s tax rate and we’re getting rid of the $4 million cap on annual cash refunds.
There is more we need to do on software and R&D. That remains a work in progress. But we have turned the corner on R&D.
Training and Fringe Benefit Tax
The Treasurer also supported our recommendation to provide an exemption from the Fringe Benefits Tax.
We recommended: “The Australian Government explore including eligible outplacement training under the Fringe Benefit Tax exemption provision for eligible startups.”
The new measure will remove costly barriers to training.
The Government will also consult further on potential changes to the current arrangements for workers who undertake training at their own expense.
The current rules, which limit deductions to training related to current employment, have probably been a disincentive for Australians to retrain and reskill.
On Digital ID, the Treasurer saw fit to act on our recommendation:
“That the Digital Identity reforms led by the Digital Transformation Agency be accelerated in order to deliver a national, economy-wide framework for the operation of a federated digital identity ecosystem as soon as possible.”
More than $250 million will be spent to expand the digital identity program to businesses making it easier to start a business and register as a director using the MyGovID to be verified.
It will reduce the amount of time it takes to register for an ABN, register for GST and payroll to just 15 minutes.
I know how much Digital ID could do for our FinTech sector here in Australia - and I am passionate to see it work for you.
Bad regulation is a job killer with no redeeming features, and we have not been served well in this area by our authorities.
The Hayne Royal Commission exposed our regulators as being asleep at the wheel. We are going to wake them up!
Assistant Minister to Prime Minister and, Ben Morton, has announced that a new regulator performance role would be set up to effectively hold regulators to account.
In an important speech before the Budget, Morton said the role would be driven from within the Department of Prime Minister and Cabinet.
He said the object would be to drive cultural change, increase accountability, promote best practice and build professionalism of regulators.
“This isn’t about being a regulator of regulators,” Ben Morton said.
“Rather it is about more systematic expectation setting, reporting, monitoring and promoting a culture of regulator excellence across the Commonwealth.”
I hope APRA and ASIC have taken note.
They haven’t served us well as they could have. It’s not their job to get involved in policy discussion. It’s their job to enforce the rules.
At least on Buy Now Pay Later, ASIC wisely keeps out of Canberra’s preserve:
“Policy and regulation of the buy now pay later industry remain a matter for Government and, ultimately, the Parliament.“
BNPL has been embraced with a 90 per cent increase in the past two years. Young Australians in particular love innovation and choice. No major issues were identified except for very moderate late fees.
ASIC rightly notes that self regulation can drive good behaviour in innovative sectors like BNPL - which is exactly in line with the legislation introduced into Parliament to support industry codes last week.
I look forward to seeing the new BNPL code starting in March.
If any consumer issues emerge in the future, ASIC can use its product intervention powers. It can deploy strong measures as a regulator as it should if required.
Having secured some “quick wins” with our Interim Report, where to from here?
We will use the remaining months of the Committee to look at longer term views of tech as a driver of future jobs and economic growth.
Last week we released an issues paper which unpacks major issues including international standards, connectivity and Australia’s competitive position.
The future is in technology like Blockchain.
It may well be the solution to one touch government.
With international transactions in real time it eliminates our time zone problem which is a disadvantage to Australia doing business with the rest of the world.
It also reduces business compliance costs.
Blockchain technology can streamline regulatory processes, reduce fraud and reduce costs to regulatory compliance and administration.
It can help Australia rebuild confidence and trust in financial services in a post Hayne Royal Commission world.
We are also steaming ahead with our Consumer Data Right regime and we need to be able to plug in to other countries.
We want to know how these standards should be set for fintech success.
We need to take a more global view of our future growth.
And I believe the first place we should look is Hong Kong.
For that reason I set up a 15 member advisory group, led by former Macquarie banker Andrew Low, of some of the best business brains in the country to come up with ideas to help Australia capitalise on the demise of Hong Kong as a financial and technology hub. I see the Low Committee as complementing the Senate Committee process.
I want them to come up with ideas so we can bust through bureaucratic roadblocks and produce policy advice for the Prime Minister’s special envoy for global business and talent attraction, Peter Verwer AO.
For example, we need a more tax-friendly regime for FinTech and growth businesses.
That’s why it’s important to implement the changes recommended in the Interim Report to the Early State Venture Capital Limited Partnership (ESVCLP) and Early Stage Innovation Company (ESIC) schemes.
But what else can we do ?
And yes, I know that Hong Kong will still be an important gateway to China but because of the recent turmoil there it just doesn’t have the same attraction as a regional headquarters.
We’d be mad to sit idly by and allow such a lucrative share of the market leak to Singapore.
Mr Verwer’s team will specifically target talent in countries like Hong Kong, the United States, the UK and Singapore.
Australia as a finance sector has been a dream for decades.
The dream will only come to fruition if government is prepared to change. By change I mean change the way we regulate and administer tax laws.
Now is the time to send our committee your ideas.
There is no good time to be hit by a crisis.
But I believe Australia is better positioned than most other countries for the FinTech sector to lead the way in our recovery.
Financial technology is a ray of sunshine for Australia.
Thank you and congratulations to all of tonight’s award winners.
MEDIA | John Mangos | 0401 392 624