9: Technology

Technology is a powerful force for change in the financial system, potentially improving efficiency and competition, and benefiting consumers. Consumers have better access to information and products to meet their needs. Firms can better customise products and enhance internal processes. Competition is emerging from technology-enabled alternative business models, new entrants and new services.

Financial services boundaries are shifting as firms from inside and outside the sector harness the power of data to create and capture value in new ways. In particular, many are seeking to influence a greater share of consumers’ spending. Increasingly, technology firms and retail groups are also becoming part of financial service delivery. These trends and benefits bring new or intensified risks.

The Inquiry has made the following observations about technology in the Australian financial system:

  • Technological innovation is a major driver of efficiency in the financial system and can benefit consumers. Government and regulators need to balance these benefits against the risks, as they seek to manage the flexibility of regulatory frameworks and the regulatory perimeter. Government is also well-positioned to facilitate innovation through coordinated action, regulatory flexibility and forward-looking mechanisms.
  • Access to growing amounts of customer information and new ways of using it have the potential to improve efficiency and competition, and present opportunities to empower consumers. However, evidence indicates these trends heighten privacy and data security risks.
  • The financial system’s shift to an increasingly online environment heightens cyber security risks and the need to improve digital identity solutions. Government has the ability to facilitate industry coordination and innovation in these areas.