Philip Gomm, Director and Industry Practice Leader Banking and Diversified Financials at Capgemini, explains how new technologies will help determine moving Australia’s payments system to a new cost base.
Much has changed in the 15 years since the Wallis Inquiry delivered a comprehensive series of recommendations that shaped much of the complicated transformational regulatory agenda we have experienced over the last decade. With the global financial crisis, the financial services industry has come under a great deal of scrutiny, responded appropriately and rebounded impressively.
In Australia, the government and regulators acted quickly and decisively across this period with a raft of measures aimed at spiking economic stimulus to avert the much prophesised deep recession. Gratefully, the worst outcomes were avoided and by the end of 2009, much of the losses incurred in stronger organisations were partially or, in some cases, fully recovered, leaving a strong sense that ongoing reforms although costly, were justified to learn from past errors.
Other overseas markets didn’t have the benefit of the economic growth we’ve benefited from across Asia, and our strong commodities markets, together with government deposits guarantees, insulated us to some degree from the widespread crunch in credit.
Nonetheless, with global capital markets constrained, the regulatory imposts designed to ensure the robustness and integrity of our financial system appeared to be also constraining our effectiveness to compete. Banks rightfully asked for a review of objectives and sensibility of capital constraints.
Thus, with the worst of the mark-to-market now behind us, it is generally agreed that it’s sensible to again undertake a review of our financial systems, with a broad reaching terms of reference established, to understand how Australia can affordably, reliably and with the utmost integrity, funds its growth, giving consideration to the events of the past and our best, most informed vision of the future.
Development in the payment system is among the changes being considered within the terms of reference of the upcoming inquiry, together with the role and impact of new technologies.
FSI: “a substantial opportunity”
The Murray inquiry presents a substantial opportunity to influence the platform for ongoing growth and innovation in the payment system, recognising the significant impact an efficient payment system can have on our economy. It is important to apply our limited regulatory capacity effectively to ensure we both gain reliable statistics and maintain efficient and resilient operation of systems.
We must decide how important it is for our banks to be the ongoing custodians of the payment system with components increasingly moving to other non-bank players. We must have appropriate and affordable regulatory control over critical components that can impact systemic risk, whilst inviting and encouraging innovation in components that can add real value, with informed risk decisions delegated to participants.
The inquiry, and the likely subsequent reforms, is an opportunity to extend the capability of automated systems in the straight-through-processing and reconciliation of a vastly increasing volume of electronic transactions, as the ongoing transition from paper to electronic payment forms continues.
The role and impact of new technologies will be a determining factor in moving to a new cost base, making increasingly sophisticated technology available to transact literally from the palm of your hand. The era of automated, simple-rules-based, computer-to-computer exchange is upon us, with the cost to pay likely to be driven to new lows as incumbents make way for new lower cost entrants in this increasingly simple, intuitive world.
Trust is the key to services provision and confidence our motivator to participate. These are realities not lost on our banks, our policy makers and our regulators as they work fervently towards recovering ground lost in the past decade or so. The consultation process gives us all an opportunity to influence outcomes and shape future directions.