Jane Hume: Australia's first fintech minister

Born and raised in Melbourne, Ms Hume completed a Bachelor of Commerce at the University of Melbourne, later returning to study political science. After several senior positions in the financial services industry, Ms Hume was appointed as a senior policy adviser at AustralianSuper, before entering the Senate in 2016.

Today, Ms Hume is the Assistant Minister for Superannuation, Financial Services and Financial Technology. But despite abandoning her initial plan to be an accountant, Ms Hume still has great respect for the profession.

Public Accountant recently spoke to Ms Hume about her new role in Prime Minister Scott Morrison’s cabinet. She candidly shared her views on innovation, super and women in Parliament, revealing that the Liberals are not big fans of being told what to do.

The fintech ministry role has been hailed a great step forward for fintechs, especially given your financial services experience. You are the first minister of this type in Parliament, meaning that you are responsible for charting your own waters, does this make the job more challenging?

It certainly makes the job more exciting. Clearly, fintech is the Prime Minister’s baby. He went to the UK on a trip in 2017 and saw open banking at work over there. He came back with a determination to implement something similar here. He was even more ambitious and decided the Consumer Data Right (CDR) that he envisioned was going to be an economy-wide CDR, and not just for banking.

We already had a burgeoning fintech community here and he established a fintech advisory panel, but it was really being run out of the innovation, industry and science portfolio, rather than Treasury. So, this is a really amazing opportunity to bring together the work that has been done both by the industry portfolio and the Treasury and put some resources behind what is now a fledgling, but really exciting industry in Australia.

You said earlier that the banking sector should beware of more tech-led competition. You also made it clear that you are not pro-bank or anti-bank, how do you propose to help the fintech community develop and evolve?

Competition in the financial sector leads to the best consumer outcome. More consumer engagement with their financial products and their financial services is the key to driving that competition. And the CDR legislation is evidence of that, which we have only really just passed. So obviously the CDR helps consumers use financial technology like comparison apps to make sure they are getting the best possible deal from their banks.

We’ve been doing an awful lot of consultations recently. We have been holding round-tables across the fintech ecosystem, listening to the views of fintechs across all aspects of financial services, payments, lending, super, the neobanks, but also in the regtech area, these hub communities like Stone & Chalk and YBF have been very helpful in that.

We have spoken about an enormous range of issues, including the regulatory environment, access to market, access to capital and skills, so there is an awful lot of policy options that have been discussed in that area. I am really looking forward to working with the industry, but also working with my colleagues in the ministry to ensure we have the right policy settings, not just in the Treasury portfolio but across the government, to build a really vibrant fintech community.

Previous budgets have not been favourable to the industry. Can we expect change next year?

I actually deny the premise of the question on that one. I think previous budgets have been very favourable to this industry. I think we’ve got quite a good track record when it comes to supporting the fintech industry. Particularly over the last government. The National Innovation and Science Agenda had $1.1 billion investment in the innovation ecosystem just in the last four years alone.

It has led to things like tax arrangements for early stage venture capital limited partnerships, that have helped venture capital investments in fintech proliferate. We have also legislated crowdsourced equity funding for both private and public companies.

The UK-Australia Fintech Bridge is an amazing innovation that is helping Australian fintech companies into the UK market and facilitating the UK fintechs to bring their products to Australia by aligning the regulatory regime. We introduced a restricted ADI licensing regime, which allows APRA to grant a time limited licence to new entrants in the banking sector, and the RBA’s new payment platform was launched quite recently, supporting that instant interbank payment. So, there has actually been an awful lot going on in this space.

And if you put CDR on top of that, which starts with open banking, but will roll out to other sectors including energy, telecommunication, superannuation … We’ve also got an enhanced regulatory sandbox coming up, which will allow more businesses to sort of test their financial services products and their services without a licence for a period of 24 months, rather than 12 months.

And then of course the other legislation we have coming up is the comprehensive credit reporting regime. Now that’s going to give lenders access to a much deeper and richer set of data that will enable providers to better assess a borrower’s true credit position and their ability to pay a loan. It will also benefit consumers who will be able to, far more easily and readily, demonstrate their reliability to get better deals on financial products as well.

There is an awful lot going on in this space.

There is a direct correlation between regulation and innovation, how do you plan to improve competition in financial services and make it easier for new entrants to get up and running?

The CDR stuff I think is fascinating. At the moment, less than one in five Australians that have a credit card or a home loan switch providers within a five-year period. And in fact, there is this fabulous statistic: two out of five Australians still use the same bank account their parents set up for them. When I read that I actually laughed, and then I realised, “oh my heavens, I’m one of them”. 

That is 7 million Australians who have never switched their basic transaction account. So, the system is clearly not as competitive as it can be, because those that do switch make significant savings. I think the statistics are something like, on average, Australians save around $200 a year by switching their credit cards and over $1,000 a year by switching their home loan.

If we can make life easier for consumers, make it much easier to switch, the reduction on cost of living pressures can be quite substantial, and the CDR will allow Australians to do that. They get access to their own financial data, so if they want to switch home loans or credit cards all they have to do is ask their bank to provide them with the data they need in a one-click passage, they don’t have to go through all the complex paperwork that was required for an application...

So, there is an awful lot to be gained there.

Frameworks such as open banking are said to help ensure Australia is supporting innovation. Where are we at with this and what significance will open banking have to the community?

The complex application process is one of the great barriers stopping people from shopping around. But if we can provide an option that is a single click process when you’re switching financial service providers, then that really empowers consumers to use comparison tools that can help them get a better deal that will foster a far more competitive and more future looking fintech and financial services environment.

That should give far better outcomes to consumers. At the moment it’s the effort and the cost, and also the lack of understanding the information that has created that financial inertia, but the benefits are clear.

Once people understand the power of CDR, it will make it so much easier for everybody to find the best deal that is tailored to them.

Beyond that, there is a security aspect. No one really seems to be talking about it just yet, but I think it’s going to become more and more important. You can ask the bank to provide all the relevant data to whatever it may be, a credit fintech company or a comparison app that can provide you with personalised information about what your best options are, but you don’t have to go through that screen scraping technology that exists at the moment.

Comparison apps already exist, but to use them you have to provide full access to your banking data, your passwords, and that puts you at an enormous risk of theft and hacking, and you are also potentially contravening your bank’s terms of service, but you’re inadvertently voiding all the legal protection that your bank can provide if you are defrauded. So that unregulated sharing of data actually disadvantages consumers at the moment.  

And the current timeline for the implementation of open banking?

The first accounts will be available in February next year. They will be very basic accounts, an almost trial period. I would imagine that open banking, like in the UK, will be a slow burn. By the middle of next year, there should be access to credit products as well, rather than just basic deposit and transaction accounts.

But I think it will take a little while before the fintechs take advantage of CDR and also consumers take advantage of the companies they can use CDR to access. It is a really exciting and transformative change. But evidence suggests it will take a while to catch-on, because it is so revolutionary.  

On the super front, while we are debating increasing the SG from 9.5 to 12 per cent, we have not defined or enshrined into law the purpose of superannuation. Will the resolution of this issue be dependent or linked to what we want super to achieve?

Defining the purpose of superannuation was actually a recommendation of the Murray inquiry and it was something that was considered at the time. I think David Murray suggested that the objective to superannuation is to provide an income in retirement that substitutes the aged pension. That was his interpretation of the objective of superannuation. It became quite a contentious issue.

There are an awful lot of voices in this industry and a lot of them have vested interest in a particular outcome. And there were an awful lot of suggestions that maybe we needed to talk about things like what an adequate and comfortable retirement looked like, and all of a sudden, the objective of superannuation started being overlayed with subjectivity, which sort of overtook the debate. 

What I think is far more important is to make the superannuation system more efficient, cost effective, remove those duplicate accounts, make sure that people aren’t being charged excessive fees, ensure that people aren’t paying excessive premiums for insurances that they don’t want, need or possibly don’t even know they have.

There is an awful lot that can be done to make the superannuation system more efficient without getting into an ideological debate about what its purpose is, because it means something different to everybody.  

There has been commotion among the public over the constant tinkering with super rules. What can be done to stop ad hoc changes and prevent undermining confidence in the system?

The PM made it really clear before the election that there were going to be no adverse changes to taxation and superannuation under his government. On top of that, the Productivity Commission recommended a review of the retirement income system and that was in advance of that legislated increase in superannuation guarantees to 12 per cent.

So, the Morrison government has already put it on the record that we’re inclined to conduct that review and we’re considering the details of that review right now, the terms of reference, and there will be a bit more to say on that in due course. 

But yes, you are right, I think that people should have confidence that the money they have put away for their retirement will be there when they need it. 

Our audience is particularly interested in the financial services licensing of accountants. Are you prepared to say anything about the potential changes, especially given the review into the Tax Practitioners Board, which seems to be pre-empting the possibility for change?

The review of the TPB is already underway and it is actually the first review of the Tax Practitioners Board since it was established. So, at the moment the public has been invited to make submissions to that current discussion paper. My understanding is that the report will be provided to government at the end of October and then it will be considered carefully and the government will respond. 

Now, I don’t want to pre-empt the outcomes of that review or the government’s response to any of the recommendations. It’s very early days. 

Now to the topic of women in Parliament, I read an earlier interview where you said that women should work their way into the Liberal Party on merit. Malcolm Turnbull recently said that the Liberal Party has an obvious women problem and requires reform to assist more women into Parliament. Do you plan to push for the introduction of a gender quota?  

This is such a contentious issue within the Liberal Party, because by their very nature Liberals are a) democratic, and b) hate being told what to do... And while I do have a number of colleagues that do support gender quotas, and we do speak about this passionately, but sensibly. It is not a divisive issue, but one that is important to address. My theory is that there are other ways, better ways of improving the numbers of women within the Liberal Party ranks.

I think that we can look at alternative pathways, through things like succession planning, formal mentoring programs. There are better ways of doing it without inflicting an outcome upon a bunch of preselection delegates who value the democratic right to choose their representatives.

Imagine an election where they said you can vote for any party you want, but the prime minister has to be female. People would be outraged, wouldn’t they? And that is essentially what a gender quota within the Liberal Party would do. It’s quite similar.

So, I think there are better ways to improve the number of women in Parliament, but it does need a collective will. It needs to start with leadership, both in the parliamentary wing and the organisational wing.

Look, the good thing is we have seen a significant number of women coming into the Parliament in the last election, some really good quality candidates, quality members of Parliament. People like Angie Bell, Fiona Martin, Celia Hammond and Katie Allen. They have really raised the bar on the calibre of women we have in Parliament. It’s terrific.

We also have a cabinet that has a record number of women in it. I think that a lot of the accusations that are levelled at the Liberal Party are a little outdated.