Opening address by Sean Hughes, ASIC Commissioner, at the ASIC Regtech Responsible Lending Demonstration Webinar, 20 August 2020.
Hello everyone, and greetings from here to wherever you are joining us today.
Many thanks to our esteemed guests, demonstrators, and delegates for joining us.
As we continue to log in, I’d like to take this opportunity to acknowledge the Traditional Owners of the lands upon which we meet;
And pay my respects to Elders past, present and emerging.
Today’s showcase and discussion will give us a window into the future of regulation. Through that, we hope that compliance can become more stream-lined, efficient and customer-centric – rather than a red pen on the page.
The credit industry continues to evolve – and while the focus in the current macro-economic environment is primarily addressed on ensuring credit flows quickly and efficiently to borrowers – customers are also expecting seamless digital interactions with their lenders.
Since the escalation of COVID-19 this year, we have seen a rapid acceleration of the pace at which these changes can and are expected to occur.
All of us at ASIC are excited to explore the opportunities regtech solutions may hold for the credit industry.
Parliament’s intention in passing the responsible lending laws was to underline the industry’s commitment to dealing fairly with its customers.
Particularly so and right now, it matters as much as ever that we ensure consumers are protected from entering into loans that are not unsuitable.
ASIC’s approach to regtech has always been governed by a set of basic principles:
And while regtech services can help in achieving compliance outcomes, let me be absolutely clear before anyone disconnects their service – this webinar is not and will not be focused on regulation or compliance.
Instead, our intent is to frame this session as a glimpse into how regtech has the potential to improve performance across the lending industry.
Regtech carries with it the capacity to improve outcomes for a wide cross-section of stakeholders.
Last year and for almost the whole year, ASIC conducted extensive consultation on our regulatory guidance – specifically RG 209 Credit licensing: Responsible lending conduct.
Part of our work to review the guidance was to update it, both so that it is contemporaneous and is also well positioned to better reflect and anticipate technological developments.
As part of this exercise I was very impressed to learn from industry how existing solutions were rapidly transforming the sector. The willingness of industry participants to share their experiences and opportunities for improvements, bodes well for today’s discussion.
From a business perspective, one entity reflected on the scaling opportunities they tapped into when considering responsible lending standards from the company’s very inception.
Through early engagement with legal and compliance teams, this lender was able to integrate responsible practices into the design of their user experience.
This form of future proofing meant that scaling was easier to manage; processes and procedures were easier to replicate; and any need for adaptation or change manifested themselves as adjustments, rather than root and branch system overhauls.
Closely related to this, ASIC was informed that current aggregation tools have the capacity to rapidly and accurately collect, analyse, and contextualise consumer data.
In one case, an organisation pointed out that analysing consumer household expenditure took between 80 to 90 percent less time when conducted digitally as opposed to manually.
That same entity was able to fully approve a number of customers’ loans, and deliver the necessary documentation to their inboxes, within 58 minutes.
Now compare this to the 64 days it takes some traditional institutions to approve similar loans.
When I first heard those stories last year, it is remarkable to think that regulators are often blamed for red tape blockages, when in fact the capability to harness and tap into technology to accelerate positive customer outcomes lies within entities, if they choose to invest in and develop it.
Whether for compliance reasons, reasons of credit, or other risk, obtaining and effectively utilising information about a prospective borrower can sometimes present numerous challenges.
We expect to see even wider-spread transformation in this area in the coming years, with the Consumer Data Right having commenced on the first of July 2020.
The initial phase of the CDR allows customers of the four major banks to share their banking data from their personal customers’ accounts.
We hope that this will provide a springboard for regtechs in bringing their ideas to life.
ASIC acknowledges that these developments will affect the accessibility and costs of obtaining transactional information, as well as building profiles of consumers’ financial situations.
Industry has voiced similar concerns, weighing them against the opportunity to challenge market conventions.
In some cases, to reward loyal clients.
In others to provide greater competition through lower, more transparent pricing.
Meanwhile others are seeking to make broader services more accessible to more customers, such as refinancing.
In ASIC’s view, the kinds of services open banking will make available, may also help licensees to streamline their processes, leading to more efficient, sustainable and positive customer experiences.
In closing, I would like to bring this address back to the core tenets of our regtech initiative series.
These events were established with a number of principles in mind:
We continue to select subject matter that simultaneously balances the pursuit of efficiency, good business practices, improved consumer outcomes, and deeper competition.
It is in combining our knowledge with industry that we can continue to instil these best practices into the market and its practices.
Thank you to everyone who has contributed to today’s discussions and demonstrations – and to you all for your interest and commitment to this time-critical dialogue.