eFinance: Trends and regulatory responses
A paper by ASIC's Executive Director Policy and Markets Regulation, Malcolm Rodgers, to the Monetary Authority of Singapore's Capital Markets Seminar, 2–8 May 2002.
Financial products and many financial services consist largely of the creation, transfer and recording of pieces of information. In a typical modern securities transaction, for example, a dealer receives an electronic instruction from a client and transmits it to a market where it is executed by an electronic system, and the resulting change in ownership is recorded by electronic means. In many cases, the transaction also involves a simultaneous or near simultaneous transfer of cash balances between the buyer's account and the seller's account.
Many other typical functions in the securities and financial services industry could be described in the same way, including product sales and issues, and dealings between financial services professionals and their clients.
In short, financial products and services are information intensive and so particularly suited to remote delivery through electronic means. They are thus likely to be one of the areas of the economy most affected by information technology developments.
So it is no surprise that the emergence of the internet during the 1990s has had a dramatic impact on the industry. It has been the driver for accelerated financial sector development, lower costs, increased breadth and quality of financial services, and wider access to those services.
There have also been changes in consumers' and investors' relationships with the finance industry. Data mining and customer behavioural records enable providers to create and tailor products specific to users' interests, and build consumer profiles online which re-personalises the relationship between customer and provider, and makes possible 'mass customization'.
Against this background, I want to touch on three aspects of the e-finance environment that we regulators find ourselves in:
- features of the e-finance landscape that we need to be aware of
- issues on which the international regulatory community is focusing
- some issues for securities regulators, including Australian experiences that might be of some help to other regulators.
As an aside, I note I have been asked to talk about 'e-finance'. A few years ago, 'e-commerce' was the word I used in titles of talks of this kind. It is a measure of how much has changed that different sectors of the economy now have their own 'e'.
When I use the term 'e-finance' this morning, I am referring to the provision of financial products and services - online banking, electronic trading, the delivery of financial products and services (such as insurance, mortgages and brokerage), electronic money, electronic payment and communication of financial information - over the internet or via other public networks.