In light of the extraordinary economic circumstances facing Australia as a result of the COVID-19 pandemic, the committee sought additional submissions in March 2020 on what assistance is required by the FinTech and RegTech sectors at this time. The committee then held public hearings in June, July and August 2020 to take evidence on the ongoing effects on the sector, as well as assessing opportunities to take permanent advantage of technological advancements made by necessity during the pandemic.
This chapter discusses the key impacts and opportunities for FinTechs and RegTechs in the current economic crisis. It then examines the technology enablers that have allowed businesses and individuals to continue to operate during the pandemic restrictions across a range of areas, and looks at opportunities created particularly in relation to RegTech solutions for business, deregulation and digitisation.
Key impacts and opportunities arising from COVID-19
The committee heard that the economic crisis has had a significant detrimental impact on various parts of the FinTech and RegTech sectors in Australia, and that some opportunities are also arising as a result of the disruption caused by the pandemic.
The Australian Securities and Investments Commission (ASIC) submitted that in its recent meetings with innovative financial services businesses about the crisis, several themes have emerged, including:
feedback that some businesses are focusing on building better services and products during the locked down period, allowing for stronger go‑to-market prospects from October 2020 onwards;
the mere survivability of many FinTech and RegTech businesses during the pandemic;
the eligibility of small FinTech and RegTech businesses to access support and assistance from Government and banks during this period; and
the eligibility of FinTech and RegTech businesses to continue to employ their staff during this period.
FinTech Australia submitted in March 2020 that COVID-19 ‘has impacted the fintech ecosystem in a significant way, with many fintechs already laying off and standing down considerable proportions of their workforce’. It stated further:
[M]ore needs to be done in respect of supporting the fintech ecosystem, which was already in a precarious position before Covid-19 as most companies are still pre-revenue or invest all their revenue directly back into R&D to support their future growth. In addition, as an industry fintechs have created a significant amount of new jobs over the past 24 months and have brought versatility to the workforce including remote working, part time [work], and bringing people back to work.
The time to act is now in order to prevent an irreversible market shock to the Fintech sector. Anything the Government can do in maintaining confidence, supporting investment and keeping people in jobs across the Fintech sector during the crisis is key to maintaining the upward trajectory of increased competition in the banking sector.
Ms Rebecca Schot-Guppy, Chief Executive Officer of FinTech Australia, told the committee in July 2020:
[W]hile the fintech industry has—to its best ability—weathered the fallout of COVID-19, the worst is yet to come. The success of some of our larger players has masked the pain felt by emerging companies in the sector. History shows the hardest time to raise capital comes almost a year after the initial downturn. We are concerned as to what this could mean for our growing industry and for those it employs in 2021.
Mr Alex Scandurra, Chief Executive Officer of Stone & Chalk and representative of the Australian Innovation Collective, told the committee at a public hearing on 30 June 2020 that it is still too early to tell what the overall impact of the recession will be on the start-up and scaleup sector in Australia, however there have already been significant impacts on workforce and customer acquisition:
[W]hat we've seen is a huge number of fintechs and regtechs, across the board, significantly constrict their employee base—and I use 'employee' more generally in terms of not necessarily employees but people that they have on their payroll in one way, shape or another. What we've also seen is a huge reduction when it comes to customer acquisition, and this is something that's extremely difficult to quantify. But, right across the board, whether it was deals with corporates that were underway, whether it was deals with corporates that were committed or whether it was healthy pipelines pre COVID, most of them have completely dried up. We're in a situation now where there are a huge number of fintechs out there that are really struggling to get revenue through the door, and…are having to stand down and let go of people and are losing that internal capability to continue to build their IP and to build their platforms. Potentially, that might have longer term consequences in terms of their viability financially.
The committee heard that larger, well established FinTechs and tech companies generally have fared well through the initial phase of the crisis, with newer start-ups and scaleups affected badly. Mrs Maria MacNamara, Convenor of the Australian Innovation Collective, commented:
Essentially, what you're talking about is established enterprises with a sophisticated offering that's already in the market, where really all they're doing is meeting an increased need. Atlassian went through the roof; Canva's sales have increased, as have Culture Amp's. So anyone that was already in the market rode the wave—just like Zoom did. Those that weren't in the market suffer from not being ready. What happens is, as the discretionary spend is killed, so are the opportunities, because no-one's prepared to take a risk. They just want to be able to move their operation online with bankable, reliable platforms that are working. That's what you're seeing. Many, many organisations that were not yet in market or where the ink wasn't dry on the contracts saw revenue lines go to zero, just like the airlines. One day they had a good pipeline and the next day it was gone.
Ms Schot-Guppy of FinTech Australia echoed these observations:
Our bigger [FinTech] companies have done incredibly well out of it. A great example is Afterpay, and 'buy now, pay later' have done really well. However, our smaller companies are really struggling on two fronts. One is raising capital. We know, from other recessions, that the hardest period for them to raise capital will actually be 12 months down the track. Additionally, our smaller companies are struggling with procurement. They may have been going down the route of partnering with an incumbent or had two potential contracts on the table and, from our understanding, they were pulled at the start of COVID. We are seeing some of our members start to get a little bit of an uptick with the economy coming back. However, it is definitely the smaller members that have been hardest hit through this time.
Mr Alan Tsen, Chair of FinTech Australia, commented that there are ‘very specific sectors’ within FinTech that are seeing an uptick:
Payments is an obvious one. Digital payments are the new normal in many ways. So it is, I suppose, a two-speed sort of ecosystem at the moment—those who have done well and those who are probably finding everything from capital raising to partnerships being slowed down.
Mr Scandurra commented on another dynamic at play in the current crisis; to a significant extent, the firms that have maintained success so far have been those offering business-to-consumer propositions rather than business-to-business products:
A lot of where they've succeeded is actually in providing alternative options to the mainstream for consumers, [for example non-bank lenders]. For fintech and regtech more broadly, I think the biggest casualty rates are likely to come from the fact that the vast majority of our sector is [business‑to-business]—that is, they're providing enterprise solutions, selling to other enterprises like corporates and government organisations.
The RegTech Association submitted that 40 per cent of members surveyed in July 2020 indicated a retraction in trials and proof of concepts—a key indicator of likely RegTech adoption—as a result of the pandemic, with some RegTech firms reporting cancellation of their entire forward sales pipeline.
H2 Ventures warned that the potential consequences of this crisis could be extremely damaging for FinTechs and other high growth companies:
The existential threat to all Fintech companies is that the SME high growth sector in Australia (of which Fintech is an important part) will be eviscerated by this crisis. This has happened before, during the so called ‘dot com bust’ in 2000, and it took more than a decade for the startup sector to re-emerge. The emerging role that Fintech companies will play in our economy means we cannot let this happen. It is critical that (a) the SME high growth sector survives the short term and thrives in the medium and longer terms; and (b) Australia capitalises on its advantageous position with respect to Fintech as the Australian and global economy moves through and beyond this crisis.
Pepperstone Group submitted that COVID-19 and ‘the extreme stock market movements that have arisen as a consequence have had an immediate impact on all financial services firms in Australia, including FinTech firms’. Pepperstone stated that firms will continue to feel the effects of the economic crisis for an extended period of time, even after the pandemic has been contained, and argued further that these impacts are exacerbated by the general uncertainty of the COVID-19 crisis:
…there are no clear indications as to how markets and investors will react, how Government restrictions may impact suppliers, and when businesses will be able to operate in their usual capacity again. There is also clearly the potential for other market events to occur that may make things worse (for example, the collapse of a key supplier or even a large, systemically important institution).
A.T. Kearney submitted that the FinTech and RegTech sectors are subject both to particular vulnerabilities and some opportunities in this period:
The impacts of the COVID-19 pandemic have been felt by all Australians and all parts of the Australian economy. The fintech and regtech industries are no exception and, in some ways, have been hit harder than other industries due to their relative infancy and reliance on underlying activity in, for example, the retail sector. Some of Australia’s leading fintechs…have shares trading at ~50% of their 2020 high at the time of writing. With that said, the fact that fintech and regtech businesses are (by their nature) digital and generally more adaptable and nimble presents opportunities as the economy progresses towards a post-COVID equilibrium.
A.T. Kearney commented that there are two distinct but related challenges for policymakers and the private sector at this time: how best to ensure the industries can survive and operate through the crisis; and how best to ensure the industries can thrive and achieve full potential post-crisis. It noted that particular challenges for the FinTech and RegTech sectors that could arise despite current government responses include persistent issues in employee retention, cashflow and consumer confidence and trust, particularly with respect to lending and credit.
A.T. Kearney elaborated on some potential silver linings emerging from this crisis that are ‘likely to act as tailwinds for existing x‑techs and even encourage new players to enter the market’:
Increased use of digital channels provides FinTechs with an opportunity to exploit a potential competitive advantage as digital natives, as they may be best placed to serve customer needs during and post-crisis.
Changing attitudes towards data and privacy may act as an impetus for wider adoption of open banking-enabled solutions once the CDR provisions are effective.
The drive to 'pandemic-proof' businesses, through automation and the adoption of technology for manual processes, may provide, opportunities to RegTech companies who are able to automate manual compliance activities.
Emergence of new 'problems' that incumbents are not well placed to solve. The effects of the pandemic will bring into focus several topics for which we do not currently have adequate solutions, for example in finance:
remote access to financial services (banking, advice);
financial planning under stress, particularly retirement planning;
debt restructuring and collections; and
affordability and funding for insurance, including health insurance, life insurance and income protection vehicles.
The Australian Government has taken significant actions to reduce the economic impact of the pandemic, with many FinTech and RegTechs eligible for a number of programs including JobKeeper (discussed in Chapter 7) and schemes designed to support smaller lenders (discussed further in Chapter 6), namely:
the Structured Finance Support Fund, a $15 billion fund administered by the Australian Office of Financial Management designed to support small lenders; and
the Coronavirus SME Guarantee Scheme, under which the government will guarantee 50 per cent of new loans issued by eligible lenders to SMEs (including several FinTech lenders).
The government also announced several measures aimed at reducing regulatory burden for financial services providers during the crisis, including:
On 20 March 2020 the Treasurer announced that the government would be providing some temporary exemptions to responsible lending obligations, to enable small businesses to continue to access loans quickly and efficiently during the crisis.
On 25 May 2020, the Treasurer announced that the government would temporarily amend the continuous disclosure provisions that apply to companies and company officers for a period of six months, ‘to enable them to more confidently provide guidance to the market during the Coronavirus crisis’.
On 8 May 2020 the Treasurer announced a six month deferral to scheduled legislative reforms arising from the Banking Royal Commission as a result of the impacts of the coronavirus. The Treasurer stated that the deferral ‘will enable the financial services industry to focus their efforts on planning for the recovery and supporting their customers and their staff during this unprecedented time’.
Technology enablers during the pandemic crisis and recovery period
The committee received evidence on a range of issues relating to the ways in which the use of technology and digitisation has enabled businesses and other entities to continue to operate through the crisis period. In many instances this has been facilitated by regulatory exemptions or changes, both at the Commonwealth and state and territory level. The committee took evidence on whether, and how, these measures can be advanced or made permanent as Australia progresses through the pandemic.
Specific areas examined by the committee include:
measures allowing corporations to hold meetings virtually and execute company documents electronically;
measures enabling increased use of telehealth and digital prescriptions;
regulations governing the virtual signature and witnesses of legal documents;
the importance of RegTech solutions to businesses, including possibilities in relation to compliance with industrial awards; and
the rollout of a digital identity framework across Commonwealth government agencies, and future proposed developments in this area.
Changes to allow for electronic company meetings and execution of documents
On 5 May 2020 the Treasurer, the Hon Josh Frydenberg MP, announced temporary changes to allow companies to convene annual general meetings (AGMs), and other meetings prescribed under the Corporations Act 2001 (Corporations Act), entirely online rather than face-to-face. Under these changes, company boards are able to:
provide notice of annual general meetings to shareholders using email;
achieve a quorum with shareholders attending online; and
hold annual general meetings online.
The Treasurer noted that meetings must continue to provide shareholders with a reasonable opportunity to participate, with shareholders able to put questions to board members online and vote online.
Further changes allow company officers to sign a document electronically, providing certainty that requirements of the Corporations Act will be met; previously, in a number of cases, signatories were required to sign the same physical document. The Treasurer stated that this measure ‘will ensure that documents are able to be properly executed at a time when ordinary business operations have been disrupted’.
Several states and territories also implemented new temporary regulations to enable the electronic execution of documents during the pandemic restrictions.
The Commonwealth changes to the corporations regulation were implemented via a legislative instrument, the Corporations (Coronavirus Economic Response) Determination (No 1) 2020, and were put in place for a period of six months beginning on 6 May 2020. The Treasurer subsequently announced on 31 July 2020 that the temporary relief measures granted in the determination would be extended for a further period of six months beyond the initial November 2020 expiry date. The Treasurer stated:
The Morrison Government is continuing to provide certainty to businesses about how they can meet their legal obligations by extending temporary regulatory relief in respect of online meetings and electronic document execution for a further six months.
The feedback that the Government has received from industry is that these temporary changes have provided certainty to business and helped them continue to operate through the coronavirus crisis. Under the social distancing measures that are currently in place, and the ongoing challenges in Victoria, it is difficult for shareholders to physically gather and for companies to execute documents in person.
Submitters and witnesses to the inquiry argued that these changes allowing online meetings and electronic execution of documents should be made permanent, and that additional measures could also be taken to help modernise the Corporations Act and make it more technology-friendly. The Governance Institute of Australia submitted:
COVID–19 has exposed many of the shortcomings of the current legislative environment, particularly the out-dated, paper-based state of the Corporations Act. If Australia’s corporate markets are to be fit for purpose in the 21st century, the legislation governing corporations and the management of corporations needs to embrace technology. Governance Institute has consistently advocated the need to bring the Corporations Act into the 21st century and to ensure it is technology neutral.
Electronic AGMs and other prescribed meetings
A number of submitters and witnesses commended the Treasurer’s Determination enabling virtual company meetings to occur during the pandemic restrictions.
The Governance Institute explained that social distancing, travel and public gathering restrictions implemented in March 2020 created uncertainty for companies about how they could legitimately conduct meetings without shareholders being physically present in the same venue, forcing companies to consider whether they could use technology to comply with COVID-19 restrictions to hold either:
a ‘hybrid’ AGM (where there is a physical location and online facilities) or
a ‘virtual’ AGM that is conducted solely online.
The Governance Institute stated that prior to the Treasurer’s Determination, the ability for companies to use technology to overcome the pandemic restrictions was limited by the Corporations Act and the provisions of their constitutions:
Many companies were unwilling to hold a hybrid AGM due to legal uncertainty as to whether their constitutions allowed them to do so. There was doubt as to whether the Corporations Act permitted virtual AGMs and there was also doubt as to the validity of resolutions passed at a virtual AGM.
The Australian Institute of Company Directors (AICD) expressed the view that companies should be able to decide on the best format for their meetings, whether that be physical, hybrid or virtual meetings, ‘mindful of the need to enfranchise their shareholders and allow meaningful participation’. It noted 2019 survey data showing that less than one per cent of shareholders attended AGMs and less than five per cent voted:
These are not positive results, given the important governance function which the AGM plays in our system of corporate governance. Virtual or hybrid meetings provide an opportunity to effectively interact with significantly more members and stakeholders by removing geographical and physical barriers to attendance.
Ms Shannon Finch, Chair of the Law Council of Australia’s Corporations Committee, stated similarly that while attendance in person at AGMs has been declining over time, hybrid meetings can provide new avenues for engagement:
One of the things that we would see as a real benefit is increased direct participation of shareholders in meetings, rather than simply appointing proxies and being passive. There's tremendous potential, I think, for these new sorts of platforms to facilitate active and respectful engagement, which we think could reinvigorate the general meeting process rather than it becoming a stale process where people file proxies and don't really pay attention and maybe read the transcript or read the release later on ASX. So we actually see the potential of technology to reinvigorate this as being greater than the difficulty of accommodating the sectors of the community that would like to attend in person. Once we are free of lockdown restrictions, we think that hybrid meetings should be encouraged so that all of those segments can be accommodated fairly readily.
Submitters noted that some listed companies holding their AGMs in late May have successfully relied on the Determination to hold AGMs digitally with shareholders participating online. The Governance Institute reported that feedback from these companies has been positive and ‘it appears that practices concerning virtual AGMs have developed over the May mini-AGM season’.
The Australasian Investor Relations Association (AIRA) commented:
We commended the Treasurer’s Determination. These measures to support companies have accelerated the inevitable evolution of the Corporations Act to reflect the behaviours and desires of investors in the 21st Century, which revolve around digital communications and technology.
Recent AGMs that have been held virtually have been highly successful, led to greater levels of shareholder participation and attendance, as well as saving listed entities thousands of dollars in costs associated with venue hire and travel costs. We believe such positive results will continue to be experienced, particularly as companies and technology providers address and resolve issues associated with the changes.
Mr Christian Gergis, Head of Policy, Advocacy, at the AICD, told the committee that initial analyses by Computershare of virtual AGMs conducted through the course of April and May 2020 ‘indicate that overall attendance has increased by 36 per cent relative to the same period in 2019, suggesting that the shift to digital platforms has facilitated greater shareholder attendance and engagement’. Further, three major ASX 50 company AGMs during this period received an average of 33 written questions, ‘indicating that the electronic format has not undermined shareholder engagement, nor has there been discernible change in the voting patterns of institutional investors’.
The AICD noted that providing flexibility in the Corporations Act to enable companies to adopt the best format for their shareholder meetings (whether that be physical, hybrid or virtual) would bring us into line with other countries which allow both virtual and hybrid AGMs, such as the United States, Canada, Spain, South Africa, Denmark, Ireland and New Zealand.
The Australian Shareholders’ Association (ASA) noted that its representatives had attended over 50 fully virtual AGMs since March 2020, with several issues arising from a shareholder perspective. It stated that some shareholders have been unable to access online AGMs due to poor internet connectivity or physical constraints that have prevented them from participating.
Ms Fiona Balzer, Policy and Advocacy Manager at the ASA, commented that at the online AGMs held to date, ‘the feeling of engagement and being heard has thus far not really been achieved’ for shareholders. The ASA stressed the importance of maintaining accountability at virtual meetings:
An important part of maintaining corporate accountability, the shareholder meeting is a forum where even the smallest retail holder can question the board and the executives. In a physical meeting, the response or lack of response to these questions is laid bare for all attendees to see. This is not the case with an online meeting where moderators control the flow of questions and ignored questions may not be apparent to the audience until complaints are made to the regulators after the event.
To address these concerns about virtual meetings, the ASA urged that companies should be required to publish a record of all questions submitted by shareholders, and answers provided by Directors at an AGM, in order to ensure transparency about which issues are being addressed and which questions (if any) are being avoided.
The ASA indicated its support for the increased use of hybrid AGMs, as opposed to fully virtual meetings, in order to maintaining corporate accountability whilst ensuring disenfranchised shareholders continue to receive adequate engagement:
The ASA has long supported hybrid meetings—a physical meeting with an online meeting—because those people who are disenfranchised from attending due to, say, their rural location, mobility issues or illness can attend from home while there are also people attending via physical presence. We are quite supportive of hybrid meetings being the way forward to encourage greater engagement overall, but we also note that goodwill is required on the part of the company as well as the part of the shareholders to make those meetings work.
Extending the temporary determination beyond November 2020
Submissions lodged in June 2020 noted that the initial six month timeframe placed on the Treasurer’s determination still created uncertainty for companies planning AGMs in November and December 2020. AIRA noted that the determination will not apply to ‘roughly 970 listed entities who have their AGM between 6 November and 31 December 2020’ as well as ‘thousands of unlisted companies and not-for-profits’. It commented further that these companies ‘must be given the option of having a virtual or hybrid AGM’.
Automic submitted that extending the determination would provide surety for companies, deliver cost savings, improve shareholder engagement, as well as enabling companies offering virtual or hybrid AGMs in late 2020 to learn from the experiences of companies who have already done so in mid-2020, delivering simpler communication and greater shareholder awareness of participation options available to them.
The Law Council of Australia emphasised the need for an early announcement of an extension of the temporary determination, or of legislation to make the modification permanent, in order to provide certainty for companies planning AGMs towards the end of 2020.
These concerns have now been addressed by the Treasurer’s announcement on 31 July that the temporary determination would be extended until mid-2021.
Technology neutrality in the Corporations Act
In addition to enabling hybrid or virtual company meetings, the committee heard that broader changes are required to make the Corporations Act technology neutral, enabling efficiency in company operations and future‑proofing the Act as technology evolves. The Governance Institute submitted:
Government should aim to enable transactions and business to be carried out digitally end-to-end: regulation should not make it more difficult and expensive to conduct business through purely digital channels.
However, given the speed of technological change and the uptake of technology accelerated by the impact of the pandemic, it is important that any amendments to the Corporations Act be technology-neutral. That is, they need to provide for the use of technology without specifying any particular technology. This allows for innovation as technology evolves.
One specific area mentioned by submitters was in relation to the requirements under the Corporations Act for giving notice of meetings and distributing materials to shareholders. Currently, notices of meeting and meeting materials must be provided to shareholders in hard copy unless they have nominated an electronic means of communication. The committee heard that this requirement results in significant inefficiencies and wastage, as explained by Ms Megan Motto, CEO of the Governance Institute:
[By] enabling companies to digitally engage with shareholders through notices of meetings…there is a significant efficiency dividend, an engagement dividend and an environmental dividend. We've done some back-of-the-envelope calculations for the committee. If you just look at the ASX top 20 companies alone and in isolation—of course, they are just the tip of the iceberg of companies that need to engage with shareholders in Australia—the approximate cost of sending out physical notices of meetings to those who have not provided email addresses equates to somewhere in the vicinity of $13 million per AGM season. Of those $13 million worth of notices sent out, there is only a 3.6 per cent proxy return. So the return on that $13 million investment is very, very small in the context of what companies are trying to do.
In addition, there is the paper that is used to produce these physical notices of meetings. If you take into account two envelopes and an average of, say, 16 pages—they can go up to 50 pages or be shorter, but we took an average of 16 pages—the waste that equates to is approximately 8,306 trees per AGM, which is per annum, for those companies alone. That's a hell of a lot of trees being cut down and environmental waste.
The ASA also supported the increased use of electronic communications for shareholders but noted that the use of emails should not be the only form of communication from companies. Ms Balzer noted that individual shareholders must have the option to opt-in to receiving communications by post, in hard copy:
I'd also like to note that in relation to electronic communications we encourage shareholders to be mindful of the delivery constraints of Australia Post. ASA supports communications by email being the default communication method, with shareholders being able to receive particular documents in hard copy. We would be extremely concerned if this were the only method of communication. No investor should be excluded from being able to buy and sell securities or receive company communications because they don't have an email address. We have already heard from members complaining about disenfranchisement due to their rural location, disability or technology setup.
In response to COVID-19, the Government amended the Australian Postal (Performance) Regulations 2019 to relax performance standards for the delivery of letters to enable Australia Post to manage impacts on its operations. Ms Balzer of the ASA provided some examples to the inquiry as to how this has negatively impacted certain shareholders:
Early in the piece, when Australia Post advised that there were going to be delays in delivering documents with the capital raisings that were going on, we were quite aware that members who were reliant on post may miss out on participating in those capital raisings. We had one gentleman from Parkville, New South Wales, who basically said that the internet was slower than the Australia Post delivery. He felt that he was unable to switch to electronic communications because he has intermittent internet. I didn't feel able to ask whether or not he's capable of upgrading his technology. Another member has difficulty typing due to the pain in her hands-she's comfortable writing-and therefore doesn't participate in life through email or electronic communications but is quite comfortable with writing or phoning people. She phoned us with that complaint, when Telstra advised that the AGM notices would only be delivered electronically. We put her onto the registry, and I believe that they have worked out how to get her the physical documents.
It was noted that Treasury conducted an initial consultation process in 2016 on these matters, issuing a proposal paper Technology neutrality in distributing company meeting notices and materials, but that reforms have not progressed since.
Several submitters provided the committee with specific proposed amendments to the Corporations Act, to provide technology neutrality in relation to the provision of meeting notices and materials, and the holding of company meetings. It was also suggested that an overriding 'technology neutral' clause could be included in the Corporations Act to ensure that technology changes are adopted as widely as possible to promote consistency and efficiency.
Electronic execution of company documents and other legal documents
The ability of companies and individuals to execute and witness legal documentation during COVID-19 restrictions was discussed in evidence to the committee.
The Law Council of Australia submitted that it has been ‘particularly difficult for members of the legal profession and their clients to sign and witness documents during lockdown’. The Governance Institute noted that executing documents when people are working remotely ‘is one of the many challenges thrown up by COVID-19’, with people working remotely unavailable to apply a ‘wet ink’ signature and often not able to print, execute, scan and return documents from home.
In this light, a number of submitters and witnesses expressed support for the temporary measures introduced under the Treasurer’s Determination of May 2020 to assist persons and companies to meet their obligations under the Corporations Act by allowing documents to be in electronic form and to be executed using electronic means (or e-signatures). These stakeholders argued that the Corporations Act should be amended to make permanent changes enabling electronic execution of company documents.
Ms Motto described reforms to enable electronic execution of company documents as ‘just a no-brainer’:
I heard a story from one of our company secretaries who had to jump into an Uber risking her own health at the height of the COVID crisis and drive to the chairman's house—luckily the chairman lived within driving distance—to get a wet signature on the minutes. To me, that is absolutely ridiculous when we are able to transact electronically in so many other areas.
The Law Council of Australia noted that the issue of electronic execution of documents is of significance in other circumstances beyond the COVID‑19 pandemic:
Improving the ability to sign and execute documents electronically, where appropriate, ought to remain a priority law reform area. Recent experience of the bushfires of the summer of 2019/2020 and, more recently, the COVID-19 pandemic, illustrates that this issue will re-surface during future natural disasters, arises often in regional, remote and rural areas and may in some instances be key in keeping pace with modern global business practises.
Issues to consider in formulating permanent changes
The Law Council of Australia raised several issues that need addressing in order to create permanent changes that facilitate digital execution of company documents and other legal documents.
In relation to company documents, the Law Council noted that the wording of the Treasurer’s temporary determination had still left some uncertainty in the minds of some legal practitioners, and commented that permanent amendments to the Corporations Act need to explicitly override the need for paper-based signatures:
The need for clear and express words is particularly important to authorise the electronic execution, witnessing and attestation of deeds, to overcome common law principles that otherwise would require ‘wet ink’ signatures on hard copy documents (known as the ‘paper, parchment or vellum’ principles) and to put efficacy of execution beyond doubt. Legal practitioners have been divided as to the efficacy of the emergency Determination, resulting in some firms refusing to give ‘due execution’ opinions on electronically signed documents and deeds, and a continued insistence on ‘wet ink’ signatures.
Ms Finch of the Law Council explained that reliance on some aspects of state and territory law in the execution of company documents can also be a complicating factor:
The execution of documents is a complicated area. It relies on a combination of federal law when documents are executed by companies and states and territory law to the extent that there are individuals involved in the execution of documents or where they need to be executed by that individual as part of a corporate transaction, so there is responsibility in all of those jurisdictions to solve the problem of electronic execution.
Ms Finch explained that differing approaches taken to the electronic execution of legal documents in different Australian jurisdictions during the pandemic has caused confusion, with particular issues arising in relation to the execution of legal deeds:
At a state level, there have been different approaches taken by each of the states and territories. Some still do not have a regime for electronic execution of documents. In other states and territories there have been significant moves made on a temporary basis during the period affected by COVID-19 to introduce e-signing protocols, but they have had varying degrees of efficacy... Each state and territory has made some efforts to acknowledge that electronic signing may be possible in a variety of ways, but the intricacies of effective signing of a document versus signing of a deed have not yet been addressed in all states and territories. In most places you may be able to sign a contract electronically, but to sign a deed at the moment is only inclusively possible in Victoria.
The Law Council stated that the absence of uniformity in this area across jurisdictions through the period of the COVID-19 pandemic ‘has significantly hampered the efficacy of emergency reforms’. It commented further that the possibility of harmonising e‑signature processes across the states and territories needs to be considered, ‘not just in cases of emergency, given that commercial and personal transactions regularly cross jurisdictional boundaries’.
Requirements for witnessing of documents
The Law Council noted that requirements relating to witnessing the execution of deeds is a particular area of concern, and expressed the view that requirements for a deed to be witnessed in person have in some cases outlived their usefulness:
Each Australian State or Territory has different requirements for the execution of deeds, but generally they must be witnessed, which is more difficult online and the witness must also attest to having witnessed for execution to be complete. In this context, an individual’s inability to execute a deed remotely is a material impediment and an unnecessary one with no sound policy justification. Whilst the purpose of the witnessing requirement was originally to protect against fraud, electronic execution is, by definition, less liable to fraud, given the digital record that is necessarily created by any form of electronic execution. Hence, consideration should be given to completely dispensing with witnessing where technology can provide robust evidence of due execution.
Submitters and witnesses pointed to several examples of technology platforms that can currently be securely used for executing documents and validating identity in that context, providing an alternate to requirements for witnessing of documents in person.
The Law Council submitted that as an alternative to removing witnessing requirements altogether, another option could be to introduce amendments to the Corporations Act to allow witnessing to occur via videoconference. This process is currently authorised in several states under temporary emergency regulations. The Law Council explained:
[These regulations] authorise a process for witnessing documents by which one person sees, through an audio-visual connection, a second person sign a document digitally. The first person then receives a copy of the signed digital document and signs a digital attestation of the documents that they saw the second person sign. This process could be authorised to fulfil witnessing requirements under federal law generally, including in relation to statutory declarations and affidavits.
Telehealth, ePrescriptions and medical technology
The pandemic has necessitated a variety of new arrangements in the delivery of healthcare, including through the use of technology to make services more accessible remotely. The Australian Medical Association (AMA) commented on the progress made in these areas as follows:
The introduction of telehealth services and ePrescriptions has led to many years of health care reforms being delivered in a matter of weeks and months... The key challenge now is ensuring that we retain these reforms while refining them to ensure they support more flexible access to care for patients – within an appropriate quality framework.
The Royal Australian College of General Practitioners (RACGP) submitted that it is ‘fully supportive of initiatives which seek to move towards a more digitised and coordinated healthcare system’ and commended the government for its ‘rapid support and implementation of telehealth and prescriptions via telehealth following the COVID-19 outbreak’.
In response to the COVID-19 health crisis, the Australian Government has made a number of announcements since March 2020 progressively expanding the availability of telehealth services by General Practitioners and other medical specialists. The most significant expansion of the availability of Medicare-subsidised telehealth services was announced on 29 March 2020 by the Minister for Health, the Hon Greg Hunt MP, with $669 million in Commonwealth funding allocated to new telehealth services items on the Medicare Benefits Schedule (MBS). The Minister stated that the new arrangements would ‘be in place until 30 September 2020, when they will be reviewed in light of the need to continue our battle against COVID-19’.
The Health Minister provided an update on 20 April 2020 that more than 4.3 million health and medical services had been delivered to a total of more than three million patients through the telehealth items introduced by the Australian Government for the COVID-19 pandemic.
Further changes were announced on 10 July 2020, whereby Medicare‑subsidised telehealth services ‘will now promote patients receiving continuous care from a patient’s regular GP or medical practice’:
From July 20, Telehealth GP providers will be required to have an existing and continuous relationship with a patient in order to provide Telehealth services.
This will ensure patients continue to receive quality, ongoing care from a GP who knows their medical history and needs.
…Requiring COVID-19 video and telephone services are linked to a patient’s usual GP or practice will support longitudinal, person-centred primary health care, associated with better health outcomes.
The AMA submitted that the telehealth measures had ensured that patients can access care without risk of exposure to the coronavirus, as well as protecting doctors from potential exposure and reduced the avoidable use of personal protective equipment during the pandemic.
Dr Tony Bartone, President of the AMA, expanded on the benefits of ongoing telehealth arrangements in evidence to the committee:
Prior to COVID-19…Australians had very little access to MBS funded telehealth, with MBS arrangements largely based on geography. COVID-19 has been a proving ground for telehealth, with the MBS reformed to support phone and video consultations where clinically appropriate. Indeed, since March around 20 per cent of all GP services have been delivered over the phone or video platforms as well as just under 20 per cent of non-GP specialist services. COVID-19 has shown that telehealth works in the Australian context. It has been embraced by patients and doctors alike. It works for both GPs and non-GP specialists.
The RACGP submitted that the introduction of MBS telehealth items to support telephone and video consultation in general practice was a ‘critically important development’ that has demonstrated that care ‘can be equally effective when delivered remotely, challenging traditional conceptions of face‑to-face consultations as the only effective medium to support patient care’.
Mrs Peta Rutherford, Chief Executive Officer of the Rural Doctors’ Association of Australia (RDAA), stated that the government’s swift action on telehealth has been ‘transformational to the system, both in response to the pandemic and for the future’:
GP patient consultations via telehealth in any great numbers had never been available prior to the COVID-19 pandemic. Telehealth through Medicare addressed many access issues. It contributed to ensuring that GP practices were able to keep their doors open and retain their staff.
Mrs Rutherford commented that rural GPs have been quick to embrace the telehealth service model:
Many would previously have used the technology when sitting beside a patient while having a consultation with a non-GP specialist in a major city or regional centre. For the most part, rural GPs also coped when supervising registrars [used] telehealth services. The Australian College of Rural and Remote Medicine actually has telehealth as a core skill for their registrars.
In relation to cost savings from telehealth, the AMA advised '[w]hile the benefits of telehealth extend beyond mere cost savings, the permanent adoption of telehealth will reduce costs across the health system while improving patient outcomes'. The AMA explained that several factors contribute to these savings:
with the most notable being the cost associated with travel, and the societal cost for the patient, such as time off work (i.e. reduced productivity) to attend outpatient clinics. Travel costs, including fuel, meals, and potentially accommodation increase with patient rurality and can present a barrier to accessing care.
The AMA provided a number of examples of how telehealth services have greatly decreased the cost of consultations and health service delivery. For example, for Indigenous Australians:
Teleophthalmology services decreased the cost per consultation to $107 compared with $260 for face-to-face services. Likewise, the use of telehealth for the home monitoring of chronic conditions reduced the cost of health care delivery by an estimated 40% compared with face-to-face. Store and forward teledermatology is also more economical than face-to-face care, and this difference increased the further the patient needed to travel access face-to-face dermatology services.
Also a home telehealth program for rural paediatric palliative care services in Queensland was found to be significantly more cost effective than face to face services. Further:
While there were considerable cost reductions for the patient when using telehealth rather than attending outpatient consultations, the savings were largest when replacing home visits with video consultation ($1214 versus $294 per consultation). The cost of clinician time and travel, travel expenses for families reimbursed through the Patients Travel Subsidy scheme, outpatient costs and equipment and infrastructure costs were considered.
Another example found a telegeriatric service model to be more economical than the cost of a visiting geriatrician service model. 'When considering the expense of the round-trip for the geriatrician and four patients per round trip, an estimated $131 per patient consultation could be saved using the telegeriatric model'.
The AMA noted that while many of the examples provided were associated with the cost of living in a rural area, 'research has suggested that the use of telehealth for metropolitan patients may achieve cost savings though economies of scale. This is because large numbers of metropolitan patients using video consultations may exceed savings from comparatively smaller numbers of rural and remote patients and their doctors not travelling large distances for appointments'. The AMA added:
The lack of uptake in telehealth services by metropolitan based doctors (until COVID-19) is influenced by a lack of reimbursement for these services. Overall, larger investment into telehealth under Medicare and more flexible arrangements around their use will likely result in long-term savings to the health care system.
Extending telehealth arrangements beyond September 2020
The AMA expressed support for continuing expanded telehealth arrangements beyond September 2020:
Overall, patients are overwhelmingly embracing telehealth as an important part of their health care management, making a strong case for the Federal Government to make the COVID-19 telehealth reforms a permanent feature of our health system[.]
The RACGP submitted that extending access to telehealth services beyond COVID‑19 ‘would allow time to gradually alleviate patient concerns about the safety of receiving face-to-face care’, and that the continuation of telehealth could also form part of an ongoing strategy to reduce the risk of COVID‑19 infection in the community in the absence of a vaccine being developed. The RACGP submitted further that patients in rural, regional and remote areas ‘require ongoing access to telehealth services to ensure parity of health outcomes with their metropolitan counterparts’.
Mrs Rutherford emphasised the RDAA’s view that ‘there is great opportunity for telehealth into the future and that, with some key amendments, it has a long future’ in Australia. Ms Rutherford cautioned that the model of telehealth pursued in the long term needs to support rural general practice rather than undermine it:
We can't have telehealth as a replacement of face-to-face consultations, and we need to ensure that the model that we set up going forward doesn't put at harm the viability of those general practices in those small communities, because that doesn't just have impacts for the primary care but also often has impacts on the hospital service as well.
The RACGP commented that the decision to require mandatory bulk-billing for GP telehealth services for certain categories of patients is creating issues for some practices:
The RACGP has received numerous enquiries from concerned GPs and practice staff who have described this decision as inequitable and detrimental to the viability of their practices, impacting their ability to provide care for their patients. During these challenging times, GPs should be trusted to apply their usual billing practices and exercise discretion where necessary (eg if patients are clearly unable to afford a gap fee).
The RACGP recommended that all Australians continue to have access to Medicare-funded telehealth services beyond 30 September 2020 through their usual general practice, and that GPs be permitted to apply their usual billing practices to telehealth services to maintain practice viability and ensure ongoing access to high-quality care for patients.
Use of telephone and video services for telehealth consultations
The committee heard that approximately 95 per cent of telehealth consultations in the COVID-19 period have been conducted via telephone rather than through video consultations.
Mrs Rutherford expressed the view that video options for telehealth need to be more readily available:
RDAA would like to see measures put in place whereby any medical practitioner offering a telehealth service should be offering both video and telephone options, with a preference for video where any level B or longer consultation is done. Telephone certainly provides a worthy backup if video fails or if the patient has a particular preference for phone, but it shouldn't be the first and foremost option.
Mrs Rutherford outlined some of the benefits of video being used in the delivery of telehealth services:
There are benefits to being able to see the patient physically as opposed to just hearing them over the phone.
Our members talk about that often it will be the trigger to ask other questions in relation to the patient's health and wellbeing and open up a broader conversation about their health and what they're doing, as opposed to just the purpose of the telephone call. So the visuals are important and will be important going forward. We just need to make sure the framework is there to encourage more videoing and that we support patients as well to ensure that their first time of using video consultations for telehealth is a positive one.
Dr Bartone commented that phone consultations offer a universally accessible and immediate option for telehealth, and that lack of investment into general practice facilities means that current video options are limited:
With the lack of investment that goes into general practice, especially on the background of a funding model, such as the MBS, which is where the patient's rebate has been frozen for the last part of six years, and putting an enormous impost on the financial viability of general practice, being able to invest in video based platforms which, at this current time, don't exist in significant numbers or maturity to become seamlessly integrated into the patient management system is not an acceptable next step until we get greater maturity and investment in that sector.
Dr Bartone noted further than general internet connectivity and capacity issues and patient preference were also strong factors in the weighting of telehealth interactions to date towards phone consultations.
Mrs Rutherford agreed that additional investment is required into video and other digital platforms to support general and specialist telehealth practice in rural and regional areas.
The RACGP recommended that in order to support optimal delivery of health services via telehealth now and into the future, governments should commit research funding into:
effective models to ensure the provision of high-quality care via telehealth for the treatment and management of a range of health conditions;
the impacts of a large-scale adoption of telehealth on general practices (during and post pandemic) to assist with the allocation of future funding; and
the role of telehealth in different contexts, including Aboriginal and Torres Strait Islander primary healthcare.
Electronic prescriptions (ePrescriptions)
Electronic prescriptions are an alternative to paper prescriptions which allow people convenient access to their medicines without having to leave their residence, thus lessening the risk of infection being spread in general practice waiting rooms and at community pharmacies.
In light of the COVID-19 pandemic, the Australian Government announced plans in March 2020 to fast-track the implementation of electronic prescriptions for medicines available under the Pharmaceutical Benefits Scheme (PBS) in Australia, with ePrescriptions functionality to be rolled out progressively from the end of May 2020.
The government also announced a number of interim special arrangements to allow people in self-isolation to access their medicines, whereby doctors can prepare an electronic prescription during a telehealth consultation (by creating a digital copy of a normal paper prescription) that is then electronically shared with the patient’s pharmacy, where the pharmacy is able to support the home delivery of medicines.
The AMA and RACGP both expressed support for these measures as important steps to reduce the risk of COVID-19 transmission, but noted some issues in how the special arrangements had been implemented, due to the need for the Commonwealth policy to be implemented through changes to regulations in each state and territory leading to inconsistencies in application across jurisdictions. The AMA suggested improved coordination of jurisdictions to align with Commonwealth initiatives more quickly and consistently, ‘especially when the changes are time-sensitive and are beneficial to the fight against COVID-19’.
Dr Bartone of the AMA commented further on the success of digital prescription measures during the pandemic:
In the absence of a full e-prescribing solution, stakeholders have worked with governments to implement interim workaround measures, including providing digital copies of prescriptions…This has left us very well positioned to take the next step forward in supporting improved patient care—a step which is long overdue and which has been very protracted in its development. The implementation of a full e-prescribing solution will do away with the need to print and store paper based scripts. Once implemented into practice software, it will become part of our normal workflows. It will give patients a choice of pharmacy, and they will no longer have to worry about losing their script. It has the potential to reduce medication errors and the associated harms. E-prescribing will be another brick in the road towards a more digitally enabled health system, one that is truly focused with the patient at its centre.
The AMA stated that it strongly supports the proposed electronic prescribing system becoming a lasting feature of Australia’s health system. In relation to the potential cost savings of this measures, the AMA noted that '[w]hile there are several causes of medicine related problems that amounts to an annual cost of $1.4 billion in Australia, ePrescribing has the potential to contribute to reducing some of this cost'. The AMA explained that there are potential cost savings at every step in the process of a patient obtaining medicine once ePrescribing is fully operational.
The RACGP commented that while it broadly supports the rollout of the government’s planned electronic prescribing initiative, this must be undertaken ‘in a measured and planned way to ensure general practices and pharmacies have sufficient time, resources and education to implement and adapt to the changes effectively’.
The RACGP noted further that the rollout of electronic prescribing creates the potential risk of monopolisation of prescription exchange services (PES), and that governments need to address this risk and ensure that general practices are afforded choice when selecting the best clinical information system and PES to suit their practice’s needs.
ScalaMed, a smart prescription tech startup based in Sydney, submitted to the committee that existing pharmacy software vendor arrangements make it difficult for new innovative companies to enter the market in Australia as ePrescriptions are rolled it out. It argued that the Australian Government needs to ensure that Australia takes a ‘truly consumer centred approach’ to the rollout of ePrescriptions and ensure that innovative new participants are not shut out of the market.
Electronic access to other medical documentation
The RACGP submitted that the rapid shift to telehealth GP consultations in recent months had highlighted the inability of GPs to deliver pathology and imaging services requests electronically, as well as an inability to safely and securely handle other medical documents digitally. It recommended that a centralised exchange server be developed by the Australian Digital Health Agency for the purposes of pathology and imaging requesting.
Advancing the MedTech industry in Australia
Australia has a growing medical technology (MedTech) sector, with a 2015 Deloitte report stating that this sector generated over $10 billion in sales and employed over 19,000 people. The committee heard that, particularly in light of the COVID-19 pandemic, Australia must ensure that the MedTech sector must be given every opportunity to thrive and bring innovative products to market.
Professor Mark Kendall, Chief Executive Officer of MedTech microwearables firm WearOptimo, told the committee that a major challenge in developing and commercialising new medical technologies in Australia is accessing appropriate investment capital. Professor Kendall argued that Australia needs to consider measures to attract funding into the MedTech sector from new sources in order to drive new developments in this area:
When we consider that it feels like there's this seismic shift taking place with COVID-19 and how Australia is positioning itself on the world stage, we need to really think carefully about building up some of our technologies locally and investing more locally. One example is that we have a venture capital system here in Australia. While it's grown and it's a lot better than what it used to be, there's still a massive gap in its maturity and its way of getting things done compared to its counterparts in other parts of the world, such as the US. So, the more we can do to plug that hole and actually put it to work so that we're not only coming up with good ideas but also manufacturing here in Australia, the better.
Professor Kendall highlighted the potential opportunities for superannuation funds to invest into the MedTech sector, as well as the need to attract offshore investment into the sector.
Dr Bartone of the AMA noted that the key bottleneck for development of the MedTech sector in Australia is at the commercialisation phase:
We have some of the most eminent researchers, most eminent professors and leading experts in parts of medtech. The key issue they've run into there is obviously funding and innovation opportunities…Often a lot of expert and innovation ideas are taken offshore or lost either in personnel or the expertise having to find people to further the process in an overseas situation.
The AMA noted that further growth in MedTech 'will obviously be dependent on the regulatory environment, including the extent to which Australian products are compliant with overseas laws, access to a skilled workforce, appropriate Government incentives and support and the encouragement of collaboration between governments, the research sector and the public and private sectors'.
Progress of Digital Identity reforms in Australia
Submitters and witnesses highlighted the importance of developing a coherent and secure digital identity framework in Australia, particularly as more government and private sector services are being accessed online through the COVID-19 period.
The task of progressing digital identity reforms is being led at the Commonwealth level by the Digital Transformation Agency (DTA), in partnership with Services Australia, the Australian Tax Office (ATO), the Department of Home Affairs and the Department of Foreign Affairs and Trade.
DTA described the purpose of creating a Digital ID framework for government services as follows:
DTA is delivering a system which allows people and businesses to have a single secure way to verify their identity to use government services online. Creating a digital identity is similar to a 100-point identification check, but with the addition of biometric proofing, it removes the need to visit a government office and strengthens identity verification. It will allow more government services to move online and be available whenever and wherever people and businesses need to access them.
Mr Peter Alexander, Chief Digital Officer at DTA, explained further to the committee:
The Digital Identity Program will give people a personal key to faster, safer, and more convenient access to government services. It will give people the ability to verify who they are, from where and when they want and with the assurance their personal information will be safeguarded.
Each time you interact with a government or private sector service, you answer questions about who you are, dig up documents like birth certificates or passports, and show various forms of ID. Digital Identity allows you to verify that information once, create a digital identity and then reuse it again and again.
Mr Alexander pointed to modelling from the McKinsey Global Institute which estimated widespread uptake of digital identity could deliver a gain of approximately $4.8 billion to Australia's Gross Domestic Product by 2030.
Trusted Digital Identity Framework (TDIF)
The Australian Government has chosen to deliver a federated-style model of trusted digital identities, through a Trusted Digital Identity Framework (TDIF), whereby a range of government and commercial service providers may become accredited to offer digital identity solutions as part of a trusted digital identity ecosystem.
Work on the TDIF began in 2015, in response to a recommendation made by the Financial System Inquiry in 2014. To date the DTA has progressively delivered four iterations of the TDIF, which sets out the rules and requirements for all participants using the Digital Identity system. The most recent iteration of the TDIF was released in May 2020, with the next scheduled review of the TDIF due to occur by July 2022.
Mr Alexander informed the committee that initial participants in the Digital Identity system have been accredited, including:
the ATO's identity service provider, myGovID;
the first commercial identity service provider, Australia Post's Digital iD;
the Exchange run by Services Australia, which protects people's privacy by sitting between a digital service and an identity provider; and
a Relationship Authorisation Manager, run by the ATO, that allows Australians to link an ABN to their Digital Identity so they can complete business transactions with the government.
As at 29 June 2020, more than 1.42 million people have created a digital identity using the ATO’s myGovID app. The DTA has conducted private beta testing of Digital Identity as a new way to log in to the myGov services portal, and anticipates that by the end of 2020 this will simplify access to myGov by allowing Australians to log in using their myGovID.
DTA noted that the vision for the TDIF is that it will expand beyond allowing access to Commonwealth government services:
Currently the Digital Identity system provides access to selected federal government services. To enable a convenient approach to verifying identity online across the whole economy, the system will evolve to allow access to private sector and state/territory government services. This additional functionality will be underpinned by strong legislative protections for users’ data security and privacy.
Mr Alexander stated that DTA is working on legislation that will ‘provide authority for the Commonwealth to connect private sector services’ including those in the FinTech and RegTech sectors, stating that this legislation ‘will further strengthen the Trusted Digital Identity Framework and boost trust and confidence within the Australian community’. Mr Alexander explained further:
For this to become an economy-wide service and capability we would need legislation that would set out the trusted digital identity framework and the requirements for participation in the identity ecosystem, because of course we can enforce policy in the federal government but we can't enforce it in the state, territory and local government jurisdictions—and we certainly can't enforce it in industry and businesses. If this were legislated, which we would like to see, we would have a national set of rules that operate digital identity—and identity more broadly—and then we would have a facility that would enable small players in fintech to access the same digital identity services as big players and they would have the ability to participate as identity providers and differentiate themselves however they see fit within that framework and legislative framework.
Private sector Digital Identity framework
In addition to the TDIF system developed by the Australian Government, a group of private sector organisations in the financial services industry, under the umbrella of the Australian Payments Council (APC), are developing an open and contestable digital identity framework called the TrustID Framework. The first version of the TrustID framework was completed in June 2019.
The Australian Payments Network, which supported the APC in developing this framework, explained that the TrustID Framework creates a series of rules and guidelines for organisations to adhere to when designing and developing digital identity products and services. These business rules and technical specifications ensure interoperability between different service providers, ‘allowing a range of service providers, including FinTechs to create a marketplace of solutions’.
The DTA stated that the TrustID framework complements the TDIF for the financial sector, in that it ‘promotes choice of identity providers and may be a path to increase the take up of digital identity in the broader economy’. DTA commented further:
The APC and DTA intend to minimise duplicative effort for service providers wishing to participate in multiple frameworks and to achieve this, where practical, the frameworks will reference the same rules and open standards. Fundamentally, both frameworks are centred around addressing the fragmented experience of proving who you are to access or obtain a service and the ability to reuse it.
In the first instance the two frameworks are focused on servicing the needs of their immediate customers. Over time, it is envisaged that the focus on open standards and strong collaboration between the APC and the DTA will mean that an individual could have the option of using a single service provider to access both public and private sector services. This could include accessing innovative digital products and services provided by the financial services sector.
Mr Alexander commented:
Our preference has always been for one [national] framework, but we know moving to one framework was challenging, so conversations with the Payments Network were about them developing a framework for financial institutions and payments providers and then seeing if we could make those frameworks interoperable, which was relatively straightforward, and build out from there.
Mr Jonathon Thorpe, Head of Identity at the DTA, noted that fourth iteration of the TDIF had taken into account a significant range of feedback from the financial services sector. This resulted in additional levels of identity proofing being added to the framework specifically to support the requirements of that sector, which would not otherwise have been needed by government agencies.
Several submitters and witnesses highlighted the potential upside to Australia continuing to drive uptake of secure digital identity solutions in the financial services sector. The Reserve Bank of Australia (RBA) commented:
The Bank is keen to see market participants leverage these frameworks to launch digital identity services in the Australian market that can start to address some of the challenges of identity verification in a digital economy. The hope is that a widely-adopted digital identity ecosystem will develop in Australia, with competing but interoperable digital identity services. There is potential for fintech firms to participate in such an ecosystem as well as to benefit from services that enable people to be more efficiently and securely identified.
FinTech Australia submitted that digital identity is ‘a key touchpoint for development of innovative technologies’, and advocated for the implementation a public-private model for a digital ID framework.
A.T. Kearney suggested that accelerating and broadening the ambition of Australia’s digital transformation agenda, including digital identity reforms, can be a foundational policy to support technology firms across all sectors of the Australian economy through and beyond the COVID-19 period. It submitted that increasing focus on already planned digital ID pilot programs, as well as expanding the possible use cases accessible through digital identification, could be part of this strategy.
Use of RegTech solutions for business compliance
The committee heard that RegTech solutions will become of increasing importance for businesses as a result of the COVID-19 pandemic, with time and cost savings able to be delivered using RegTech products.
The Australian Small Business and Family Enterprise Ombudsman (ASBFEO) submitted that small businesses are vital to Australia's economic recovery and often bear a disproportionate regulatory burden. It argued that endorsing RegTech solutions ‘is a simple way for the Australian Government to cut red tape for small business’. Ms Kate Carnell AO, the Australian Small Business and Family Enterprise Ombudsman, told the committee:
[E]mbracing regtech to translate complex regulation—such as in the IR space, in the tax space or in the OH&S space—to make it simple and usable for small businesses can help them to get it right. I think most small business, most businesspeople, want to do the right thing, but sometimes the complexity of regulation that they find themselves in makes that really hard.
Ms Carnell stated that RegTech is a ‘real opportunity to make it easier and simpler for small businesses to cut the red tape and to get on with running their businesses’.
RegTech solutions for compliance with industrial awards
ASBFEO suggested that as part of a COVID-19 recovery plan for small business, RegTech solutions developed by the private sector should be accredited by the Fair Work Ombudsman (FWO) to provide ‘a technology driven method for small business to adhere to the current awards system, contracts, conditions, and dismissal processes’. ASBFEO explained:
The Fair Work Ombudsman should endorse a (or several) reg-tech solution(s) where accurate conditions and pay scales can be ascertained. It should be integrated with payroll software to make it easy for Small Business to pay their employees with confidence. Government should not duplicate services already available in the market, but should partner with the private sector, and could initially focus on the largest awards/sectors.
ASBFEO argued that in situations where an accredited RegTech solution has been followed, a small business should be provided a safe harbour from prosecution for non-compliance:
Given that the current system includes inherent difficulties for businesses to be fully compliant, the government should ‘de-risk’ the landscape for Small Business by providing a ‘safe harbour’ where they have acted in good faith. Initially, this safe harbour should be achieved through ensuring that, where an eligible business has made a mistake after relying on tools, information or advice provided by government, that business is able to ‘make good’ without any additional penalties unless it can be reasonably shown that they did not act in good faith.
In response to questions about how an accreditation system for RegTech products could work in practice, the ASBFEO offered the following outline:
1. The Fair Work Ombudsman [would] develop and provide to each regtech company that wishes to gain compliance accreditation, a test package for each award. The regtech companies would test their systems and provide the results to the FWO. If their results are compliant, they would then receive accreditation.
A list of accredited regtech products would be published and maintained by the FWO. The FWO could alter and re-administer the test packages on a regular basis. This would ensure ongoing wage compliance for small business through any software changes by the regtech companies or changes or new interpretation to awards or legislation.
Where a small business correctly used an accredited regtech product and is found to be incorrectly paying staff, they would make good on the payment but face no additional penalties or prosecution. Where a small business chooses not to use an accredited product, they are subject the system as it currently operates.
2. The provision of public legally binding rulings on award interpretations be used by the Fair Work Commission in response to more complex questions posed by regtech companies. These rulings could be built into regtech products to ensure compliance with complicated award and legislative clauses.
This would again provide clarity and confidence to regtech companies in developing robust products. The rules could also be made available to those businesses that chose not to use regtech.
Tanda, a Brisbane-based company that provides a cloud-based workforce management platform to help businesses manage rostering, time and attendance, and payroll calculations, submitted that technology is ‘the best means of identifying and uncovering unlawful employee underpayments’. It argued that small businesses need ‘off-the-shelf technological payroll compliance solutions’:
[Small businesses] do not have the resources to invest in expensive legal and accounting services to help them interpret and apply awards. Instead, they need to have confidence that when they invest in a technological solution it provides them with compliance off-the-shelf. This technology is essential to avoiding, as well as identifying and uncovering, underpayments.
Tanda suggested that, rather than a formal accreditation system for RegTech products in this area, the Government should develop a rating system ‘to measure and report on the extent to which off-the-shelf payroll calculation technology provides a compliant solution when used properly’.
Mr Roderick Schneider, Head of Strategic Partnerships at Tanda, told the committee that the FWO already assesses compliance with industrial awards for the purposes of prosecuting non-compliance, and that this kind of interpretive work could be done up front in the development of a ratings system for relevant RegTech products:
The Fair Work Ombudsman makes no guarantees about the advice it gives, which leaves doubts surrounding the correct interpretation. This doubt must be removed to give employers and employees certainty. The Fair Work Ombudsman has sufficient capability to interpret awards for the purposes of prosecuting non-compliance, so it is well positioned to give clearer certainty to us and employers generally when it comes on what interpretations it believes are correct.
Tanda argued that rather than formal ‘safe harbour’ provisions in relation to the use of RegTech products to help businesses comply with industrial awards, the Fair Work Act 2009 should be amended to make investment in compliant payroll calculation technology by a business ‘a factor that courts must consider when imposing civil penalties in the case of underpayments’. It explained:
We are not recommending that employers be able to avoid making good underpayments. However, since technology is so integral to ensuring payroll compliance, employers should have legislative encouragement to invest in it. Making investment in compliant payroll technology a factor that courts must consider when imposing civil penalties is a proportionate degree of encouragement, while allowing the court to ultimately determine what civil penalty (if any) is appropriate.
Tanda also recommended that the FWO itself invest in RegTech solutions in order to conduct its enforcement activities more effectively, and recommended further that the FWO invest in an upgraded ‘true payroll calculator’ for use by the public on the FWO website.