Claire Wivell is a financial services law specialist, with a passion for simplifying complexity and making legal solutions affordable. She founded The Fold Legal in 2002 to assist financial services businesses of all sizes to manage regulatory, corporate and commercial legal challenges. Claire Wivell is a member of the Advisory Boards of 5 Fintech Businesses. She is a member of the Treasurer’s FinTech Advisory Group and the Business Advisory Committee to ASIC’s Licensing Division. Claire Wivell is also a Honorary Counsel to the Institute of Managed Account Providers and The Fold Legal is Legal Partner to FinTech Australia.
What are the current legal challenges concerning FinTech at present?
Although financial services regulation is said to be technology neutral, we are learning that in many areas it isn’t. One obvious example is that electronic consents are not readily catered for. A question we must ask in an emerging world – in a blockchain world in particular – is, are all our current regulatory structures necessary? For example, our system of clearing, settlement, custody and registry has four layers, with attendant inefficiencies, cost and potential for error. The regulation of this process doesn’t contemplate a trust-less decentralized register (aka, a blockchain) where those processes occur instantly. This will need to be resolved in the context of emerging blockchain-enabled financial markets. Technology is developing so quickly that it’s very difficult for regulation to keep up. Our legislators and regulators need to develop more flexible methods of regulation-making to facilitate the speed of change. Consumers also need to be confident that new technologies provide the same (or better) levels of protection. Consumers need transparency and certainty about the manner in which transactions are conducted. Regulation can support this by facilitating and recognising built-in consumer protections, rather than outdated analogue proofs.
What are the advantages for a FinTech operating in Australia compared to doing business overseas?
Compared to many other jurisdictions, Australia has a flexible regulatory framework that tailors the authorisations businesses need to the services that they provide. As FinTech startups must comply with all the same rules that apply to larger organisations, this provides confidence to FinTech customers. The Australian Securities and Investment Commission (ASIC) has implemented an Innovation Hub to promote and support FinTech businesses. This has paved the way for many FinTechs to develop a dialogue with the regulator. ASIC’s Regulatory Sandbox which is designed to enable FinTech businesses to test their concepts has been slightly less successful due to its limited scope, but there is currently a bill before Parliament to expand its reach. This will to enable more start-ups to participate.
Is Australia’s system too onerous for FinTechs?
No, I don’t think so. Australia’s framework is relatively consistent with other jurisdictions such as Canada, South Africa and the UK, which makes it an excellent testing ground for FinTech businesses. It is trusted in Asia as well, and there is anecdotal evidence that the US and UK based FinTech businesses can more readily obtain traction in Asia if they successfully test in Australia. Australia is infinitely better than the US which has state-based regulation. Getting authorised and complying with varying laws in every state in which you operate, is hard work, not to mention, expensive!
What are some of the present challenges facing the industry?
Legacy systems make it very difficult for large institutions to innovate internally, primarily due to the difficulty of accessing data. Westpac is probably the leader in innovation. They’ve established a successful innovation fund called Reinventure, which they partly own and fund. At the same time, Westpac has invested directly in several start-up businesses that they are allowing to flourish independently of the bank, whilst working alongside it. ANZ is approaching the problem differently. They are actively working to bring innovative technologies into the organisation. This is harder. They have committed to it by hiring some of the brightest minds in the country and by taking an axe to the bank’s hierarchies and bureaucracy to shift the workforce into an agile framework. We haven’t seen any other bank tackle the issue head-on in quite the same way.
What are the current regulatory risks regarding FinTech?
My greatest concern is that the incumbent regulatory frameworks will slow down digital innovation. Take disclosure as an example. Today’s customers want and expect a fairly simple and instant experience. Regulators want to ensure they are protected and informed. Integrating all the required disclosures into a delightful customer experience, on say a mobile app, is a big challenge as multiple disclosure regimes must be navigated, and each have specific requirements. Some streamlining would help.
What are your views on Cloud and Security?
Cloud services are cheaper and more efficient, but two key elements need to be managed; privacy and cybersecurity. The extra-territorial operation of the EU’s General Data Protection Right is rapidly creating a level global playing field for privacy, and FinTech businesses need to assume it applies to them. Cybersecurity is critical. Because FinTechs deal with consumer’s financial information, they need to incorporate the highest cybersecurity protection from the outset. There’s anecdotal evidence that this is not happening, which is concerning. It’s a key focus for the regulator.
These insights from Claire Wivell are drawn from the experteq Banking Industry Report 2018. Read the full report here.