This paper was produced under the Funding Australia’s Future project which aims to better understand the changing dynamics of the financial system and its impact on future economic growth. The research from Stage Three explores specific challenges to the financial sector highlighted by the Financial System Inquiry, Tax System Review and Intergenerational Report. 

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Australia has a predominantly services driven economy which is increasingly digital, online and driven by user generated data. Within our digital economy, financial services – principally banking, insurance and capital markets – has overtaken all other sectors to become the largest sector of the economy.

The recent financial crisis and its aftermath have fundamentally challenged beliefs about the way financial systems, businesses and households behave. There are increasing demands for financial services organisations to have a greater customer-centric focus, operate with greater transparency and provide greater consumer protection. Customers have also demonstrated a far greater willingness to engage with non-traditional loan, investment, saving and retirement products. As a consequence, there have been waves of technology driven innovation in the finance sector coming from both incumbents and from new entrants challenging for a share of the market.

In such an environment, data are significantly undervalued as a factor of production, a means of increasing transparency, and a source of innovation. The ability to harness a wide range of large, constantly evolving and highly personalised data sets is a strong driver of productivity and supports the creation of new, high value services. As financial services companies continue to create value by digitally enabling their current business models, the opportunity exists to adopt new, disruptive business models targeted at ever more refined customer segments.

This paper provides recommendations focused on the increased use of bigger, better data, providing examples of innovation and disruption from a number of sectors including finance. Amongst the recommendations, the most important for Australia include the urgent need for regulatory clarification – facilitating the use and benefits from bigger, better data while protecting consumer privacy – and the need to open up data sets for research and commercial purposes within such a clarified regulatory environment.


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The Australian Centre for Financial Studies (ACFS) initiated the Funding Australia’s Future project in late 2012 to undertake a stocktake of the Australian financial system, and its role and challenges in facilitating future economic growth within the wider economy.

In an economy that has enjoyed 21 years of consecutive economic growth and shown a resilience through the Global Financial Crisis (GFC) which is the envy of many nations, the financial sector has played a strong and pivotal role. The past decade, however, has been one of significant change. The impact of the GFC and the subsequent wave of global re-regulation have had a profound effect on patterns of financing, financial sector structure, and attitudes towards financial sector regulation. Identifying the extent to which these changes are transitory or likely to be more permanent is crucial to understanding how financing patterns and the financial sector will develop over the next decade or so.

The Funding Australia’s Future project is in three stages, the third of which explores key challenges to the Australian financial system, highlighted by the Financial System Inquiry, Tax System Review and Intergenerational Report.

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