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That's a wrap!

On Tuesday 18 May, at the Boathouse by Zest Waterfront Venues at The Spit in Mosman, the financial services community returned face-to-face and online for the 2021 AFIA Conference.

The day was themed In the Now & into the Future, with AFIA providing a platform for knowledge sharing, collaboration and connection to help deliver and plan for a more resilient, inclusive and sustainable financial services sector.

The Conference hosted over 150 attendees, 25 speakers and 15 industry partners, with key sessions highlighting the critical issues facing financial services such as digitisation, responsible lending, changing regulation, and shifting consumer behaviours.

It was a great day for us all to test our thinking to ensure we are leading change, innovating, advocating and influencing on behalf of the Australian finance community.

AFIA IMPACT 2020

Peter Jones, AFIA Chair, opened the 2021 AFIA Conference by acknowledging the achievements of the finance industry over the past year as ‘amazing’. He commended the combined efforts from everyone in ‘Team Australia’ working towards the nation’s recovery.

Focusing on how to sustain this into the future, Peter gave warning not to be complacent and to watch out for the headwinds of globalisation, deglobalisation, changes in global trade and supply chains, and access to goods and services. He also highlighted the economic impact that lower immigration and population growth will bring.

Presenting financial services and technology as familiar partners, Peter went on to say that even though technology has underpinned our industry for decades, the digitisation of the global economy represents many risks and opportunities:

  • Demands of regulation and compliance
  • Increasing RegTech
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  • New digital products and services emerging, which have the potential for greater connectivity across our communities, but also the potential to create a new ‘digital divide’.

Speaking about the future, Peter stated that although he believes a seismic shift is underway, AFIA and our members are at the epicentre of this shift and will embrace the challenges of the modern financial industry, fuelling a new generation of financial services to support greater social and financial participation across the community.

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IGNITING OUR RECOVERY

Senator the Hon Jane Hume, Minister for Superannuation, Financial Services and the Digital Economy & Minister for Women’s Economic Security focused on measures in the Federal Government’s 2021 Federal Budget that continue to support Australia as it moves through the next stage of the COVID-19 pandemic, and ensure we remain a resilient and secure country.

Minister Hume said Australia is ‘roaring back to life’ and the government is doing its bit to support our recovery. She detailed the programs, tax relief and incentives to support the economy, support job creation and support essential services – from childcare through to aged care – and also women’s economic security.

The Budget was framed as a set of targeted spending and investment measures to support innovation, with the Digital Economy Strategy front-and-centre in that – seeking to build on the accelerated digital adoption by people and businesses over the past year – to boost competition domestically and internationally.

Minister Hume outlined a number of key initiatives to build jobs for Australians now and into the future, including:

  • Over $100 million to support digital skills.
  • $124 million into Artificial Intelligence projects, including a National Artificial Intelligence Centre led by CSIRO Data 61.
  • Enhancing Government services through a $200 million investment to overhaul ‘myGov’.
  • Digital Games Tax Offset.
  • Enhancing cyber security with over $50 million to strengthen safety, security and trust.
  • Unlocking the value of data in the economy and setting the standards for the next generation of data management.
  • $480 million in funding to modernise the business registers.

Minister Hume also discussed the ongoing financial support and guarantees that the government is giving households and businesses, especially small business, during the global pandemic. She highlighted the non-financial measures that have also been implemented by the government, including increasing the pace of the Consumer Data Right rollout, improved access to business services, better coordinated data management and technology-neutral regulation, through to significant reductions in red tape for businesses. She also highlighted measures to strengthen the economic security for women in Australia, noting the package of around $3.4 billion to improve outcomes for women’s safety, health and financial wellbeing.

Minister Hume finished up by talking about Buy Now Pay Later (BNPL) as an Australian innovation and an example of where industries need to be able to flourish without regulation stifling them – she welcomed AFIA’s BNPL Code of Practice with its focus on raising standards and consumer protections.

A REGULATORY PANORAMA

Sean Hughes, Commissioner, ASIC and Diane Tate, AFIA CEO caught up for a robust ‘fireside chat’ covering the panorama for regulatory issues. During the conversation, they dug deep on how ASIC is thinking about its role in the economy and how it works with the financial services industry to protect consumers while supporting innovation, and how that manifests in the regulatory and enforcement regimes for 2021 and into the future.

The conversation importantly addressed ASIC’s Regulatory Guide 209: Credit licensing: Responsible lending conduct (RG 209), which is currently ‘on the shelf’ pending the outcome of parliamentary reform to responsible lending laws. Sean mentioned that ASIC conducted widespread consultations, trying to provide examples that were helpful in showing an array of lenders in different experiences and situations. He responded to criticism of ASIC about being too focused on processes and not enough on outcomes, and said that somewhere along the way ASIC didn’t do a good enough job in communicating the intent to support lenders in making lending decisions, saying, “It was never set out to be hard and fast principles; that’s not the way ASIC write policy guidance and if that’s how it came across, we have to own that.”

Getting to the deregulation agenda, Diane commented that current regulation may be causing unnecessary costs for 

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consumers and providers, particularly the disclosure regime, which is based on outdated business models and old concepts of how financial services is used and she asked, “Should we blow this up altogether?” Sean stated that in reality this is a policy matter for government, however, ASIC believes advances are needed to make sure regulation remains relevant. Sean added that self-regulation has an important part to play in new and innovative sectors where traditional regulations may not fit, referring to AFIA’s BNPL Code of Practice as a good example.

Financial hardship, better use of data, debt collection, cyber security and Artificial Intelligence were all hot topics in the Q & A. Sean left the audience with his final wish list of ‘digitisation and greater use of data for consumers’ as drivers of better customer outcomes.

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LEADING THE WAY 

Talking about ‘Leading the Way’, AFIA welcomed Ann Sherry AO, who encouraged the industry to look forward and not back to reshape business for the future, and to use people who have the courage and ability to move to something new in a crisis.

Ann asked the audience to think about new ways to educate and reach customers better with financial services, using online channels, new functionalities in digitisation, and in different communication methods, like videos and podcasts.

Ann also talked about resilience and the importance of adaption. Businesses and governments will need to change the way they do things to maximise future opportunities and address increasing, and increasingly complicated, risks. Certain changes have been underway pre-COVID and as the pace of change accelerates, leaders will need to understand more deeply their environment to get ahead of the curve.

On the hot topic of working from home, Ann highlighted that businesses will have to earn the right for people to come back to the office and do it differently. She recommended that if diverse vibrant workforces are what leaders want, then they need to build the future workplace around people and their extended family lives, and to not be too rigid. In other words, really embed flexible working arrangements.

MOVING GOALPOSTS 

A very lively session was brought to us by Paul Bloxham, Chief Economist, Australia, New Zealand and Global Commodities at HSBC who shared the positives and the possible headwinds heading our way for the economy. He started with the headline that we are in a post-crisis global economic upswing because of the extraordinary speed of the vaccine development and rollouts, and the unprecedented size of the fiscal policy response globally.

Paul also noted that market and business confidence is being sustained by the fact that governments are flagging that they will maintain the fiscal stimulus, rather than tail it off as they did post-GFC. However, he said, the global recovery is and will continue to be ‘bumpy’ (thanks to successive waves of the health crisis) and uneven (with countries and industries on different pathways – manufacturing ‘benefited’ from consumption of more goods and less services during the lockdown phases, and vice versa). China and the United States are leading the recovery. Europe is lagging behind because of slower progress on both vaccine rollout and fiscal stimulus. Australia is ‘middle of the pack’.

Paul sees the key global economic questions as centring around successful stabilisation of the health issues, and whether inflation will ‘raise its ugly head’ thanks to the perfect storm of a steep upswing, fiscal stimulus, and supply constraints – that is, whether inflation is temporary or becomes embedded.

Paul talked about the next big economic questions for Australia being management of the international border opening and enormous policy stimulus (monetary and fiscal working together as a ‘whole of government operation’ to tighten the labour market, lift wages and hence inflation back to its target).

Positives:

  • Policy-makers have done a good job [during the pandemic]
  • Globally, governments are delivering fiscal support to drive economies
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  • The vaccines are being rolled out in developed countries
  • Demands for goods has picked up – manufacturing is in an upswing.

But, Paul says, there are the headwinds that may influence our sustained recovery:

  • Lower numbers of migration – immigration, international travellers, and international students and the effect on the Australian GDP, population growth, and loss of income
  • Behavioural change – less business travel, more working from home, increased online shopping resulting in different consumption of goods and services, such as spending redistributed to local areas and not the cities
  • Degradation in Australia’s relationship with China (our third engine of growth)
  • Monetary policy limitations and lack of a medium-term economic growth plan (and, ultimately, budget repair plan).

Paul expressed his disappointment that there isn’t a deeper reform agenda to deal with these headwinds. He said, “We’re in an upswing, enjoy it, but there’s a new normal we need to deal with that is going to give us challenges.”

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THRIVING NOT SURVIVING

Wendy Mackay, Managing Director & Partner, Boston Consulting Group streamed in from home to discuss how the financial services industry can thrive not survive across three key areas: people, data, and climate.

The first theme Wendy presented was about people
and explained to keep and engage the best people will mean going further than before; creating company culture, building affiliation, and sharing knowledge.

The second theme was data, although Wendy said it does come with huge risk around privacy and security, and
regulators are increasing their focus in this area. She advised that to thrive and survive is about truly embedding good
practice into your organisation in these areas.

Finally with the third theme, climate, Wendy said to have a better understanding of ethical decision making, both:
“Doing what the law says is right or doing what [you believe] is right” will impact actual and perceived organisational performance.

DIGITISING THE FUTURE 

Joining Dr Michael Schaper, BNPL Code Compliance Committee Chair on the panel was Rebecca James, CEO Humm, Piers Redward, Co-Founder & CEO, Payright and Lee Hatton, Executive Vice President, Afterpay. This session brought some timely debate front-and-centre on the latest BNPL developments, behavioural and generational shifts in access and attitudes towards finance, including demand for credit, regulatory challenges and keeping up with industry innovation and customer expectations, and the new AFIA BNPL Code of Practice.

 

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KING OF DISRUPTION 

Brett King, Australian Futurist, joined us from the United States to kick off the afternoon session with a look at the future and how this might influence the finance industry.

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Brett predicts there has to be cooperation with the technology platforms saying that the best outcome for the customer experience is when everyone is working together. He recognised the banking shift already towards digitisation, and the ability for technology to achieve simplicity and lower friction.

Moving through the banking evolution from Bank 1.0 – Bank 4.0, it appears success from some was mindfulness of behavioural psychology in delivering their products and services. For the world of banking 4.0, Brett says finance needs to be built into the process.

With huge evidence of disruption in financial services across the globe, Brett highlighted digital wallets, QR codes, facial recognition, digital identity biometrics, data protection issues and purchasing behavioural change – all to watch out for now and in the future.

REINVENTING FINANCIAL LITERACY

David Koch, TV Presenter, Paul Clitheroe, TV Presenter and Jessica Irvine, Journalist joined us for a candid conversation about financial literacy – or should we say: ‘helping people understand money’!

The panel were all in agreement that the media helps to translate the financial conversation to the public in a way they can understand. The COVID-19 crisis is a ‘teachable moment’, but it is critical that government and the industry find new ways to reach and communicate with Australians.

Paul fought hard on his stance to find improved ways to have financial capability included in Maths and English in schools. David Koch said that both the government and the industry need to improve their communication of finance to the public, saying “The problem is government and the professionals take money too seriously”. 

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Jessica indicated her expectations are for the government to reshape the policy conversation better and use channels like Instagram or TikTok if they want to get through to younger generations.

So how does the industry invest in financial literacy? Wrap it up in a package that is relatable. Successful engagement comes when it isn’t boring and it’s in a language the public understand.

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IN CONVERSATION WITH THE ASBFEO

Now one thirtieth into his sixty-month term (as he likes to say it), Bruce Billson, Australian Small Business & Family Enterprise Ombudsman took the stage with Jason Smith, Director, Capital Plus Finance for a small business conversation hosted by Cameron Poolman, CEO, Ondeck.

Bruce talked about access to finance for small businesses
being a key priority, improving digital engagement for resilience, and supporting small businesses through our recovery with government procurement. Jason tapped into the
conversation on financial literacy in small business, saying
there is a lot of information out there but not everyone is understanding it, with Bruce agreeing that there is a great gap between ‘the small business and the banker’.

Jason’s advice to lenders, “Keep innovating and make it
easier for the customer. Get rid of wet signatures.
Keep thinking about making processes quicker for micro-businesses.” With Bruce saying, “Be their best ally. You have wisdom and insights that they will crave.
Be prepared to listen and understand their long-term objectives.”

PUTTING PEOPLE FIRST 

Stephen Jones MP, Shadow Assistant Treasurer & Shadow Minister for Financial Services and Superannuation took the time to cover a range of emerging issues for the finance industry, making sure that access to credit supports our recovery, but not at the expense of lowering standards or creating additional risks for consumers.

Mr Jones acknowledged the significant efforts of the finance industry in supporting customers through the COVID-19 crisis. 

Specifically referring to regulation of BNPL, Mr Jones stated that it should be regulated as a credit product, however, indicated that although legislation is needed, it’s not ‘one size fits all’. He acknowledged the new AFIA BNPL Code of Practice is good, with self-regulation the first step to codify standards in the law.

He then specifically referred to the government’s proposed changes to credit laws, stating that this was precisely the wrong time to be removing the RLO and making changes to lending standards. This was said in the context of the Royal Commission.

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Mr Jones also commented on the work-from-home revolution, productivity, and the challenges for businesses and employers. He touched on the change in regional economies, wage level predictions and the deficit. With a focus more broadly on finance he stated, “The finance industry will be at the leading edge to facilitate this and help contribute to the rebirthing of our economy” and further starting, “We wish and hope the government can match [the finance industry] in innovating for the future”.

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THE FUTURE OF CREDIT: HARMONISING HUMAN & AI

CEO of Rich Data Corporation, Ada Guan spoke about the future of credit and how to harmonise human and Artificial Intelligence (AI) for financial services. 

She discussed access to credit globally, addressing the credit gap, the debit economy verses credit economy, and human bias.

One issue highlighted included the younger generations that don’t have credit cards and posed the question about how lenders can assess credit history and credit scores into the future. What information will be relevant? How will this information and data be available?

When asked if AI will become beyond our control, Ada responded, “AI does have the ability to learn for itself already. The interjection of human interaction with AI and transparency to understand what it can do and not do is really important. We are at a critical point”.

RISING TO THE COMMUNITY 

Cris Parker, Head of The Ethics Alliance at The Ethics Centre referred to key take-outs across all the AFIA Conference topics and their connection with ethics. 

Cris noted there are a lot of people with great intentions that are not intending to make unethical decisions and encouraged professionals to increase ethical awareness and develop frameworks. She discussed how we need to look at our organisational values and principles, look at what is being rewarded, and base an ethics framework that aligns purpose and behaviour.

Cris said to, “Develop a context to drive this good intention to help your organisation thrive, but with the individuals still making the decisions.” She introduced the Banking and Finance Oath (BFO) as an artifact for the industry to engage and deliver better customer outcomes.

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Finally, ending on a thought-provoking question when asked what difference do words make, Cris answered, “What are we if we’re not our words. Saying I do. Saying sorry. What does it mean? If we’re not our words, then what are we?”

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THE LATE DEBATE: KEEPING THE CUSTOMER CLOSE

The Late Debate asking – ‘What does it really mean to be customer-centric?’ – turned up the humour, while contemplating the role of different business models in the finance industry.

Aaron Baxter, CEO, CustomFleet adjudicated the challenging teams:

Jon Moodie, CEO, Allied Credit Group; Jamie Osborne, CEO, GetCapital & Keith Rodwell, CEO, Maia Financial
Vs
Mario Rehayem, CEO, Pepper Financial Services; Clare Morgan, Executive General Manager, Business Lending, CBA & Peter Jones, Managing Director, Nissan Financial Services Australia and AFIA Chair

Smaller and more specialised lenders argued they know their customers’ business better and offered a more personalised services and tailored products. The bigger end of town said they were a ‘one stop shop’ for their customers with a frictionless experience, with size not a compromise on specialist finance. Some great arguments and facts were presented, with the audience also entertained by the friendly banter throughout the session. Although the affirmative team took home the trophy, we think the jury is still out!

MOVING AHEAD

Diane Tate, AFIA CEO, closed the conference drawing out three themes from the conversations throughout the day:

  1. Turning challenges into opportunities – as economies reshape and communities continue to be impacted by the COVID-19 crisis, Australia faces many headwinds. However, we have an opportunity to take ‘teachable moments’ and turn these into ‘teachable intelligence’.
  2. Hearing things differently and being prepared to do things differently – noting the genuine attention to work differently and the invitation from ASIC for a new way of engagement.
  3. Turning resilience into courage – we have an opportunity to see a pathway to make things happen – we need to ask: what are the three, simple yet bold, things we can do (perhaps as discussed today, these priorities are people, data, and climate)?

Diane thanked our speakers, members and sponsors for supporting AFIA and bringing their expertise, knowledge, experiences, insights, and innovations to the Conference. We couldn’t do it without you! She also thanked the AFIA team and Adam Spencer, Conference MC, for making sure everything ran so smoothly!

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