The purpose of the financial sector is to serve the community. Its core objective as it relates to personal finances ought to be the improvement of individual financial wellbeing, which in turn should be the guiding principle in government policy, regulation and
technology in this regard. In order to fulfil its purpose, the financial sector needs to be effective, sustainable, inclusive, safe and ethical.
To achieve the above we have made a number of propositions, organised below into broad categories. For a fuller discussion of each proposition please download the full White Paper.
Implementing a national financial wellbeing framework
Australia needs to develop and widely adopt a National Financial Wellbeing Framework (the Framework) that defines the aspects of financial wellbeing and how they are measured.
A National Financial Wellbeing Agency (the Agency) should be established with a mandate to improve financial wellbeing in the Australian population.
A government advisory group should be established to advise the government on its financial wellbeing strategy, representing all key stakeholder groups.
Building financial capabilities of individuals and households
The financial capabilities of Australians need to be developed and fostered.
Compulsory, nation-wide, evidence-based financial literacy training should be introduced in schools. Financial literacy training should also be offered at TAFE and in universities.
Free basic financial health checks and advice should be available to all Australians at critical points in a person’s life-cycle.
Free financial counselling should be readily available to all Australians when they need it.
Research on how existing and emerging technologies can be used to improve financial capabilities should be conducted on an ongoing basis.
The ethical consequences of innovation should be considered and debated as technical solutions are developed and before they are deployed.
Technology needs to be utilised better to achieve interactive or “smarter” disclosure of information and better support financial decision-making.
Any policy measure regarding financial capability should be evidence- based and road-tested during the design stage, that is, before it is implemented.
Realigning the structure of the financial sector
Customer contracts, and the rights and obligations of the parties under such contracts, should be fair, transparent and capable of being assessed by the individual by reference to his or her financial wellbeing. Contractual documentation should be evidence-based and road-tested to ensure that it is effective and fit for purpose.
One or more national research centres should be established to support the finance sector in service and technological innovation.
The Framework should become the basis for professional standards in financial services and regulation, including the provision of advice.
Basic financial services (transaction accounts, basic forms of credit and insurance) should be designated as essential services on a national basis and be treated as such to ensure universal access and fair pricing (e.g. on a cost-recovery basis).
Legal and regulatory requirements should ensure that similar services (e.g. services with similar risk-return profiles that serve a similar purpose) are priced on a similar basis. There should be appropriate pricing constraints on credit and financial products to avoid predatory behaviour, excessive rent seeking, extortion and inequitable outcomes.
Strengthening laws and regulation
Legislation should be simplified, and exceptions and qualifications should be eliminated to the greatest possible extent.
It is necessary to move beyond prescriptive, rules-based regulation towards principles-based, outcomes-focused regulation, which is supported by regulatory guidance.
Financial services providers should be subject to a duty to consider financial wellbeing in performing their functions and providing their services; in particular, they should be required to consider what impact a course of action would have, or would be reasonably likely to have, on the financial wellbeing of an individual.
Making technology useful and safe
Increases in data sharing must be balanced by stronger privacy protection, as has occurred in the EU. Australia should adopt similar protections offered by the GDPR, in particular a right to deletion and a more accurate definition of de-identification, one that recognises the possibility of re-identification by considering de-identified data as continuing to be personal data.
Financial institutions should be required to give access to a public Application Program Interface (API) for algorithms that determine the terms and conditions of financial services. This would allow for
a) public and regulatory evaluations of fairness;
b) commercial sensitivity (the exact algorithm would remain private);
c) customers to analyse how changes in behaviours or holdings will affect their access to financial services.
A hierarchy of customer data variables should be defined to allow comparability and reproducibility of algorithmic results.
In the absence of a chartered body for data science, financial service companies should establish an industry code of conduct that requires greater transparency in relation to the use of algorithms and an industry code of conduct that requires customer data to be used only within a consent framework and in a manner that is not detrimental to the financial wellbeing of the customer. Both companies and their employees should be signatories of the code, with independent oversight and accreditation undertaken to provide public assurance of compliance.