A leading regulator has urged the rapid development of regtech solutions as part of the process for Australia’s embattled financial sector to “restore trust” with the public.
James Shipton, the chairman of the Australian Securities and Investments Commission (ASIC), made the call in a hard-hitting speech at a finance industry conference last week, where he urged financial industry leaders to move from “rhetoric to reality” in restoring trust.
The reputation of Australia’s financial services industry has been rocked by revelations at the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, which has heard a litany of abuses flowing from entrenched conflicts of interest and poor governance.
Speaking at the Financial Services Council 2018 Summit in Melbourne last week, Shipton outlined three ways in which the financial services industry could win back public trust.
The first two were cultural: addressing conflict of interest and a perceived leadership vacuum. But the third was an investment in regtech systems.
“There needs to be more investment in management systems and processes to capture, diagnose and remediate conduct issues earlier, quicker and more efficiently,” Shipton said.
“This includes the adoption of emerging regtech solutions.”
Shipton said Australia lacked investment in regtech, with the result that “it takes far too long for management to meaningfully address conduct problems.”
He cited a recent exercise on breach reporting, where ASIC looked at reporting by 12 banking groups and found that it took an average of 1,500 days, or over four years, between an incident occurring and it being identified internally for investigation.
This was often only the first step in a lengthy process which culminated in a report to ASIC.
"There is an urgent need for investment in systems, procedures and policies that better and more quickly identify emerging conduct and systemic issues so that they can not only be reported to us more quickly but so that they can be resolved more quickly," Shipton said.
Regtech startups have been slow to gain traction in Australia, and one of the most highly regarded companies Checkbox recently closed its first-ever funding round, securing a modest AUD 1.77 million from angel investors after two years of “bootstrapping.”
Checkbox won an annual pitching competition at last year’s StartCon event in Sydney, winning AUD 120,000 in credits from IBM and a trip to San Francisco to represent Australia in the Startup World Cup.
The company provides a web-based application to combine regulatory and compliance processes into software applications, which then deliver automated assessments and documentation.
Another Australian regtech startup, Gobbill, is backed by Microsoft and recently inked an agreement with global player Isignthis, enabling the company to become a bigger player in the verification and Know Your Customer (KYC) space.
The regulatory body, AUSTRAC, which deals with settlements and clearing, recently hosted a Regtech showcase in June, which was attended by around 120 representatives from across the financial sector.