While fintech is helping reshape the financial services market, it also brings with it a number of inherent risks such as a greater chance of fraud, Greg Medcraft, chairman of the Australian Securities and Investments Commission (ASIC) has warned.
In a speech delivered on Wednesday (14 December) at the Group of 100 National Executive Dinner in Sydney, the chairman detailed the risks behind fintech as well as what the regulator was doing to combat these issues.
“Greater customer and investor empowerment – without appropriate understanding of the risks of the products and services they are accessing – raises the risk of investor and consumer harm,” Medcraft said.
The emergence of fintech could create new channels that perpetuate fraud both within and across borders, he added.
“We also see risks arising from the increased use of technology to capture, store and analyse data. The obvious risk here is the increased risk of cyber-attacks and the misuse of data.”
With consumers wanting control of their personal information, trust is critical, Medcraft said.
“Consumers will need to be comfortable with where data is being stored, how it is being used and who it is being shared with.”
Despite the risks, ASIC recognises the opportunities that fintech provides and is striving to create an environment which stimulates innovation without compromising how the financial system functions.
Medcraft said the regulator was working to do this in five different ways:
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- Engaging with start-ups within the sector through an Innovation Hub set up in April last year
- Creating a time-limited ‘light touch’ regulatory environment via a licensing exemption for fintech businesses released yesterday (15 December)
- Producing regulatory guidance about how new developments fit into the regulatory framework
- Building up skills and systems within ASIC to rethink the way data is captured, stored, accessed and analysed
- Working with other regulators to understand future developments and help entrepreneurs expand into other markets