The Financial Services industry is due for a shake up and this year we will see a number of high profile reports that are intending to do just that. Regulation is generally identified as a pain point for small-medium enterprises (SMEs), but, with problems come opportunities! Keeping up to date with what’s coming can be tricky, so we have summed up some of the important bits for you below.
Small Business and Family Enterprise Ombudsman Report
On 28th February 2018, the Australian Small Business and Family Enterprise Ombudsman in partnership with FinTech Australia and the Bank Doctors released Fintech Lending to Small and Medium Enterprises: Improving Transparency and Disclosures. This report is a comprehensive analysis of the current FinTech ecosystem in Australia and the barriers that these businesses face in acquiring and servicing its customers.
How Your Business Can Benefit
In 2016 – 2017 approximately $346 billion was lent to businesses in Australia. However, only 1 out of 25 of these loans were for less than $100,000. Australian FinTech’s are capitalising on the big banks’ resistance to lend to small businesses. This gap presents an opportunity for lending based FinTechs to address the growing lending needs of SME’s.
The Royal Commission into Banking
The Royal Commission into Banking was formally announced in November 2017, interim report due 30 September 2018. This Royal Commission, led by Justice Hayne, is tasked with inquiring into and reporting on misconduct in the banking, superannuation and financial services industry. Public hearings start in Melbourne on March 13th and it is anticipated that Justice Hayne will focus on settled cases, even those that were settled with gag orders. The Commission is webcasted so if you like courtroom drama, you can tune in here.
How Your Business Can Benefit
The Interim Report is not due until 30 September 2018, so it is a little too early to tell how SME’s will benefit from the Royal Commission. However, as the Commission is empowered to look at lending practices to SMEs and Farmers, it is likely that the banks will be encouraged to address their conduct for this sector of the economy
The Productivity Commission’s report into Competition in the Financial Services
The Productivity Commission is tasked with looking into the Australian Financial Sector. This is part of the current government’s commitment to fostering innovation whilst balancing the need for financial services providers to be trusted and productive. The Productivity Commission report is focusing on how to improve consumer outcomes, the productivity and international competitiveness of the financial system and economy. The Final Report is due 30 July 2018.
How Your Business Can Benefit
A Draft Report was released in February 2018 and could have a substantial impact on the competitive environment of financial service providers. The recommendations thus far have included reducing the barriers to entry for new banks and insurance companies, as well as having one government body responsible for monitoring competitive practices. If the recommendations are followed through, this could mean more support for small start-ups against the Big 4 Banks. However, whether these recommendations will make it into the final report remains to be seen. Regardless, the sector will be waiting with bated breath for the final report in July 2018.
The Treasury’s Report into Open Banking
The Treasury released their report ‘Open Banking – Giving Consumer’s Choice’ in February 2018. This report is significant as it will effectively transform how companies use our data. Banks currently capture the “value of customer banking data” (n/a, Open Banking, 2017) whereas the implementation of the open banking framework grants customers access to their personal data for the first time. The Report also recommended the implementation of a Data Standards Body, which will liaise with current regulatory bodies around appropriate data standards. The Report is revolutionary and it shows the government’s inclination to create a customer-centric data sector generating growth and employment, and importantly, value to customer by increasing safe and efficient access to data.
How Your Business Can Benefit
The Big 4 banks will be the first required to comply with the open data standards, with the telecommunications and energy sectors to follow. The aim of open banking is to facilitate stronger competition amongst providers and reduce the hassle of switching banks. Information equals power, and by having this data, SME operators may have a better bargaining position when negotiating deal terms with the banking sector.
Conclusion
It is definitely an exciting year for Financial Tech companies with the government’s renewed focus on building opportunities for Small-Medium Enterprises. Although regulation is generally seen as a pain point for SME’s, these reports are a way to advance such enterprises towards the digital economy.
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