This week
the Government announced
the establishment of an advisory committee on financial technology to help
make Australia the leading market for financial technology – or FinTech – in
the Asia Pacific region.
The Committee has a membership of apparently well
qualified individuals involved in the development of the financial technology
sector, but no-one with any obvious background in remote issues.
As the
Government’s media release makes clear, the main game is in mainstream Australia
as financial services is the largest sector of our economy, employing around
450,000 people and contributing over $140 billion to the economy last financial
year.
Nevertheless, it is worth reflecting on the potential implications
for remote Australia, where market failure in the provision of financial
services is endemic, and the concomitant consequences for remote citizens,
particularly the 120,000 Indigenous remote citizens are substantial. For a
Government which includes ‘economic development’ as one of the two major elements
in its Indigenous affairs policy narrative, the desirability of exploring the potential
for greater innovation in the provision of remote financial services should be
a ‘no-brainer’.
Of course, the Commonwealth is rolling out pilots for the
cashless welfare card in the East Kimberley and Ceduna regions, and is
exploring a third regional centre. Refer my previous
blog post on this topic.
It is already clear that the Government is prepared to
support the introduction of new technology in remote communities. Minister
Scullion recently announced
Commonwealth assistance for the introduction of CCTV into Aurukun, a community with
an extremely troubled history of violence and dysfunction.
The National Broadband Network is being rolled out nationally,
and while there have been criticisms
that the proposed satellite based services to the 7 percent of Australian citizens
resident in remote regions will be less effective than the fibre based services
in urban and regional Australia, it does seem likely that services
will improve in remote Australia post roll-out.
Telstra has
been active in engaging with Indigenous issues, and has a
range of initiatives which it is pursuing with potential application for
improving financial services in remote regions. In particular, the funding of an
Indigenous Digital Excellence Hub at the
National Centre for Indigenous Excellence in Redfern has terrific potential and
appears to be a first for Indigenous Australia. Nevertheless, Telstra’s focus
appears to be still focussed on traditional phone based services rather that
expanding mobile use into the financial services sector. Its initiatives to
date are thus relatively modest and might best be characterised as prescient and
far-sighted first steps.
In contrast,
one can get a sense of the potential gains from innovation by considering developments
in Somalia, a nation which has been a failed state for the best part of the
last two decades. Recent media coverage
suggests that Somalia is rapidly moving to a cashless society, based on
extensive use of mobile phone platforms to replace cash transactions and
associated traditional banking services. A report
on the role of remittances in the Somali financial sector by Oxfam USA confirms
the growing importance of mobile platforms.
The
emergence of these innovative solutions in Somalia and other parts of Africa is
clearly a response to necessity, and builds on the widespread up-take of mobile
technology over the past decade.
We have seen
in recent years a similar uptake in mobile
usage amongst remote Indigenous communities, particularly amongst younger
residents. And clearly, banks are increasingly making access to their services
available to mobile phone users. Yet to date, there appears to be little indication
that the banks and telecommunications sectors are facilitating the use of mobile
technology to underpin widespread improvements to access to financial and
banking services amongst remote community residents. The reason for this is partially
structural – the remote market is miniscule compared to mainstream markets, and
the particular needs of remote citizens, particularly remote Indigenous
citizens, are not widely advocated. This is a small, but crucial market failure.
Given the theoretical
rationale for Government support of innovation rests almost entirely on the
existence of spillovers or externalities which lead to market failure, there is
certainly a case for the Government and its new Fintech Advisory Committee to
consider further what might be done to improve access to financial services for
remote citizens.
Perhaps this
is an issue which the Prime Minister’s Indigenous
Advisory Council might usefully take up?
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