The collaboration between regulation and technology, regtech, can help overcome the financial services sector's heavy reliance on the use of disclosure as a regulatory tool, Treasurer Scott Morrison believes.
In an address to the fintech Australia summit last week, Morrison said regtech could provide enhanced regulatory compliance by building it into an organisation's key business practices and operations.
"In the online and digitised world, de-risking and de-regulating an environment actually go hand-in-hand," he said.
"All financial institutions, including fintech start-ups, need to realise that operational risk includes poor conduct and lack of control and not just systems and processes.
"Conduct risk is a key emerging area of focus and opportunity within financial institutions as the very real costs of scandals and the compliance with regulatory responses impacts on tight margins and low growth forecasts."
Morrison said ‘compliance by design' financial systems and processes could have checks or proof-points built in the system that would give real effect to consumer protection measures.
"Using new technologies to solve regulatory and compliance burdens more effectively and efficiently has the potential to create new efficiencies in the financial system because it will help create a regulatory system in Australia which is more technologically advanced," he said.
"The automation of compliance with regtech has the potential to overcome individual foibles and human error in a way that provides the quantum leap in culture and compliance that our regulators, customers, policy makers and the community are increasingly demanding."