5 July 2017
Xinja welcomes the opportunity to respond to ASIC’s proposed approach to regulatory technology. Xinja is building Australia’s first fully digital bank, made for mobile. We are not a bank yet but we plan to be and have initiated licensing conversations with our regulators including ASIC. We believe it’s time Australians had access to new digital banking services already enjoyed by consumers in other parts of the world such as Europe and Asia, as well as home grown innovations that serve their interests, delivered through a brilliant mobile experience.
Regulatory technology plays a key role in how Xinja creates innovative customer experiences that are incredibly low cost, fast, simple and easy to use whilst ensuring that customers are protected and their money and data is secure. Xinja is deliberately designed around customers’ needs and in their interests, with human-centred design being at the core of how we operate. Distinct from traditional banks, Xinja is focused on enabling our customers to make intuitive, optimised, rapid & better money decisions without the angst.
Xinja does not have the costs of retail branches or the burden of legacy systems, that typically make processes cumbersome and slow for customers. In Australia we have a regulatory framework that has imposed unnecessary costs ultimately borne by consumers, due to its heavy reliance on paper based, and face to face based compliance. The customer impact manifests in multiple ways: financial (from costs that are passed on to customers), psychological (the stress caused by the uncertainty of how and when customers are able to do what they need to do), as well as opportunity cost (time, effort, duplication of effort, eg. needing to be at a branch in person during bank hours). We believe regtech can significantly reduce these costs and open up greater opportunities to deliver improved experiences.
As a starting point, Xinja fully expects to use regtech to provide customers with greater security, thanks to biometrics, geo-location and facial recognition software. We are also optimistic that regtech can accelerate how soon we can enable customers to:
- start using a new account within seconds
- see payments in real time with instant balance updates
- monitor progress against personally set financial goals
- quickly and easily make sense of their money using simple visuals tools
- create automatic checks to prevent them spending more than they wanted to
- set aside funds they are saving for specific purposes without having to open a separate account and
- start saving with a single swipe
Further, customers have specifically said they expect us to use technology to provide additional real time transparency, and to simplify how they buy, access, and use financial services, without compromising security or customer protections. To that end, we commend ASIC’s forward looking approach and how that might translate to world class human-centred, technology-enabled innovation in financial services.
General comments on ASIC’s future approach to regtech
Xinja proposes a number of additional areas for consideration as part of ASIC’s future approach to regtech:
- greater engagement with, and representation of, younger consumers that may not be as well represented by traditional consumer groups
- opportunity for regtech to help early stage fintechs more quickly, easily, and with more clarity and certainty and less legal costs. This would further democratise understanding of consumer rights and obligations and how they apply to new services, with a view that the majority of new fintechs are borne from a genuine interest in solving customer problems and regulation should only help, not hinder, how new fintechs create customer value
- use of regtech to flag to regulators, investors and fintechs alike, that a fintech might be ready to transition from one regulatory regime to another
- a more human-centred design approach to making it easier for early stage fintechs to engage with regulators well before they have the scale and resources and regulatory expertise of established financial services players
- bringing in innovative thinking from other sectors outside of financial services – learning from how other sectors are dealing with regtech
- what regtech could mean for extreme ‘users’ and beneficiaries of the regulatory framework eg. first time users – the first time a person engages with / purchases a financial product in their life.
- how could regtech would help democratise investing for young people
In response to ASIC’s Innovation Hub progress and overall approach to regtech
Xinja has had positive experiences with ASIC’s Innovation Hub to date, and in particular the access it has provided to senior staff and informal guidance to navigate the regulatory pathways to licensing for innovative financial services. Xinja plans to make full use of ASIC’s regulatory sandbox opportunity to provide a limited release of our customer innovations, with regulatory guidance that accelerates the path to full licensing in a pragmatic, customer focused, commercially viable and scalable way with minimal red tape.
Xinja also acknowledges the steps ASIC has taken to partner with other regulators in the region, and we note that ASIC’s approach has sought to be more accessible and speedy than even its UK counterparts. This only further supports fintechs in Australia looking to have an impact in the global economy, and looking to be competitive on a global scale.
We encourage ongoing dialogue with customers and industry stakeholders to better understand the regulatory barriers to customer innovation, and to share learnings from across the globe – especially from those who are already managing multiple regulatory frameworks across borders.
In response to ASIC’s specific questions (Section 92 of ASIC Report 523)
ASIC’s Overall Approach: Do you have any comments or suggestions on ASIC’s proposed future approach? We would welcome details on any initiatives you would like to suggest.
Xinja supports ASIC’s proposed next steps to establish a new regtech industry liaison network, conduct technology trials using regtech applications and establishing a ‘hackathon’ later this year to help identify roadblocks to the successful and rapid take-up of the sector. Xinja hopes this approach will go a few steps further to create more explicit connections to the customer possibilities, and customer problems that could be solved, as a result of the proposed approach.
We believe it is possible to maintain the strength of existing customer protections, and the strength of the overall sector, without needing to impede the market’s ability to provide customers with the best possible products, services and customer experience. We look forward to engaging with regulators and regulations as a means of providing valuable customer confidence, rather than unnecessary red tape that constrains how the customer experience could be.
Establish a regtech liaison group: Specifically concerning the liaison group proposal, do you have any comments on:
(a) the nature of this group;
Xinja encourages a diverse and inclusive approach to the nature of this group. We propose that diversity considerations include customers’ representation that takes into account more digitally savvy customers, younger customers, and customers who are increasingly engaging with financial services via technology rather than face to face contact. We also recommend including organisations at different life cycles (from established to startup), organisations from both inside and outside the fintech / financial services sector who deal with similar challenges in other ways (eg. dealing with fraud in other industries), and stakeholders including investors, other Australian regulators and global tech companies.
(b) the proposed purposes of the group;
Xinja proposes that the purpose of the group includes discussion of what is occurring in the industry from a customer perspective – in particular some recognition of regtech impacts on how customers engage with financial services on a day to day basis.
(c) how regularly this group should meet;
Depending on the availability of participants, quarterly meetings should be sufficient. However we recommend that this group have the ability to engage on an ongoing basis outside of quarterly meetings.
(d) whether the group should be an invite-only structure, an open invitation or some hybrid model;
Xinja has no firm view of invitation structure, however Xinja would welcome the opportunity to participate in the liaison group. It is important however, that the design of the group is sufficiently diverse and representative of all stakeholder interests, in particular tech savvy financial services consumers. In addition, Xinja believes that bringing in external experts from outside the industry would greatly add to the creativity and innovation possible from bringing such stakeholders together.
(e) how big or small should this group be; or
A small working group of say 10-15 organisations would probably work best.
(f) what should be the primary purpose of this group (e.g. information sharing, networking, or providing opportunities for collaboration with industry, or with ASIC and other regulators)?
Xinja recommends that the primary purpose of the group be focussed on exploring how regtech can deliver better financial services consumer outcomes – through information sharing, collaboration and collective problem solving.
Continued use of technology trials: What kind of information would the industry like to know about ASIC’s use of, or trials of, regtech applications or approaches?
Xinja would be interested to know more about:
- the linkages between ASIC’s use of / trials of regtech applications and how they relate to known regulatory compliance challenges / customer experience challenges
- ASIC’s views on how it could use or engaging in open APIs, artificial intelligence, blockchain & new AML / KYC related technologies and how this compares with regulators elsewhere
- ASIC’s role in driving regtech acceptance on a global scale, and creating global regtech standards that would enable Australian fintechs to not only meet domestic compliance obligations but also obligations across the globe.
- use of APIs to reduce reporting and compliance burdens – especially financial reporting.
- ASIC’s own use of robo-advisors to make it easier for organisations to engage with ASIC regulated compliance obligations
- any trials of technologies that can streamline AML / KYC requirements for businesses
- ASIC use of technologies that do away with requirements for physical signatures, and the possibility of interacting with ASIC via mobile apps
- key learnings from trials done to date
Hosting a problem solving event: Do you have any comments or suggestions on topics that could be considered at a problem-solving event? What other factors need to be considered? For example:
(a) How should such events be designed?
(b) What subjects or problems lend themselves to such an event? Why?
(c) What other considerations should ASIC take into account in arranging such an event?
Potential subject areas to consider might be how a fintech could easily navigate the licensing process, incident management such as widespread identity takeovers, fraud issues, cyber threats and disaster recovery.
Xinja would also like to see topics that give a voice to issues as experienced by consumers, or at the very least ensure the problems to be solved are framed in terms of what they mean from an end customer perspective.
We thank ASIC for the opportunity to respond and encourage ASIC to continue to engage both informally and formally, with the broader tech and financial services community. We would welcome the opportunity to meet to discuss our response further, as well as to be a member of the liaison group on an ongoing basis. We believe Australia could be a global leader in innovation in the financial services industry and look forward to ASIC’s continued leadership role in this area.
Chief Risk Officer
Co-Founder & Customer Innovation Director