Financial services technology – known as fintech – has been earmarked as an area of priority for the Turnbull government, with a number of initiatives in the works to foster its development.
Among these are the expansion of the regulatory framework around crowdfunding and robo-advice, ASIC’s creation of a ‘regulatory sandbox’ to help facilitate communication between start-ups and regulators and the introduction of the Blockchain database.
Baker & McKenzie partner Astrid Raetze suggested fintech is the latest “hot topic” and that its impacts would be long lasting.
“Any lawyer working in financial services is going to be affected by it,” she said.
Current fintech innovations are happening in both front-office and back-office processes, with particular emphasis on mobile phone technology and artificial intelligence.
Even firms not working directly with start-ups or technology providers will be affected by these trends, especially as major banks and financial institutions invest in the sector, according to Ms Raetze.
“Existing clients – who may not even be technology clients, but for example a financial planner or an investment bank – will be looking at technology in respect of their back offices,” she said.
“Plus existing customers will also be looking at how they can generate new income and revenue from their front offices.”
For lawyers in this area, understanding the new technologies will be critical, she warned.
“If you don't understand how the technology works, you can't advise on it properly – you won't understand how the regulation impacts the technology,” she said.
The other major challenge will be regulatory uncertainty, particularly as many promised initiatives are still in the planning stages.
“The government has indicated that these regulations […] are all coming but they are not here yet. One of the issues is navigating your way through existing regulations, but bearing in mind that in the future that's likely to change.”
This means lawyers will need to keep clients in the loop on regulatory changes and new opportunities, she suggested.
These rapid changes are likely to remain a feature of the financial services landscape for the foreseeable future.
“The regulators are effectively having to keep pace or catch up with technological change,” she said.
“And that's going to continue because technological change tends to be exponential. So I think regulation in this area will continue to change for the next five years.”
As an example, she pointed to the regulators’ ongoing grapple with algorithmic trading and high-frequency trading, both of which came to the fore in 2010.
Given the shifting regulatory landscape, she encouraged lawyers to gain a comprehensive understanding of their clients' business plans and strategies.
“It's only when you understand your clients' businesses and their view on fintech that you can properly advise them,” she said.
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