The federal government has adopted the majority of recommendations made in last year's financial systems inquiry report, promising to deliver a national federated digital identity framework and a public-private sector innovation committee for the financial sector.
In its long-awaited response to the December 2014 report, tabled today [pdf], the federal government also said it would ask the Productivity Commission to review options to improve data-sharing within the sector, and remove regulatory impediments to modern product information disclosure.
By the end of next year, the government also intends to consider how to amend priority areas of regulation to make it technology neutral.
The FSI report, led by David Murray, highlighted a national federated digital identity as key to improving the efficiency of digital identity processes as well as to minimise the costs and regulatory burden of customer authentication for financial services firms.
Its recommendation - accepted by the government - called for the establishment of a framework under which private and public sector bodies could compete to supply digital identities.
A single minister should be given responsibility for the framework, the report suggested, and a private-public sector taskforce should develop the detail of the framework and standards.
Banks and other financial services firms are currently required to verify an individual using government-issued, paper-based credentials such as a passport or drivers license.
By introducing a national digital identity framework, reliance on paper-based mechanisms could be reduced, making the process more secure and convenient for customers and more efficient for governments and banks, the FSI report said.
It recommended the government utilise the national document verification service, the myGov service portal, the national e-authentication framework, the Finance department’s third-party identity services assurance framework, and the government’s Vanguard electronic authentication service, among others, to create the framework.
The government today said it would task its Digital Transformation Office with developing the trusted digital identity framework.
Joint innovation committee
Technology-related innovation has the potential to transform the sector, so long as regulation and policy does not get in the way of change, the FSI report said.
It therefore recommended the establishment of a permanent “innovation collaboration” committee made up of private and public sector bodies to make sure government responds quickly and appropriately to innovation in the sector.
The government today agreed, promising to establish the committee in an effort to "unlock productivity improvements" in the financial system and help emerging firms and start-ups engage with government.
The innovation collaboration committee will be linked to ASIC's digital finance advisory committee "to avoid duplication", the government said. It will be established by the middle of next year.
The Murray report acknowledged that while difficult, banks should be encouraged to share more of their data publicly for the wider benefit of the industry.
Datasets that would allow the industry to operate more efficiently should be made public, the report said, through incentives such as data-sharing arrangements, cost-recovery arrangements, and user charges.
It recommended the Productivity Commission be tasked with looking into the costs and benefits of making more public and private sector data public, while also considering privacy implications, before the end of next year.
The recommendation was today agreed to by the government, which said it will engage the Productivity Commission on the matter by the end of the year.
However, it steered clear of pledging to enshrine any data-sharing obligations in legislation.
"We support current industry efforts to expand data sharing under the new comprehensive credit reporting regime rather than through legislation," the government said.
Technology neutrality, modern disclosures
Antiquated legislation is holding financial firms back from communicating product disclosures to customers in a modern way, the FSI report said.
It endorsed the pilot of digital product disclosures by ASIC, AMP and Vanguard but pushed the government to remove regulatory impediments preventing modern approaches becoming more widespread.
Additionally, regulation needs to take a technology-neutral approach to ensure it doesn't discourage innovation, the Murray panel said.
The government today confirmed it would adopt the recommendations, and promised to consider how to make legislation in the financial services sector technology-neutral by mid next year.
"Technology-specific regulation can impede innovation and competition by preventing the adoption of the best technology or the most innovative business models," it said in its response.
"We will embed the technology neutrality principle into future legislation and regulation making. We will consult with the financial sector on priority areas of existing legislation and regulation that present regulatory impediments to innovation, before commencing work on any amendments."
It also pledged to change legislation to allow for modern information disclosures after the ASIC pilot is complete in 2017.