Financial advice firm to pay $1 million penalty for breach of best interests duty – ASIC

ASIC says the first civil penalty has been imposed on a financial services licensee for breaches of the best interests duty under the Future of Financial Advice (FOFA) reforms. The focus on the matter was on the “best interest” provisions and the remuneration model. This is a significant development.

The Federal Court has imposed a civil penalty of $1 million against Melbourne-based financial advice firm NSG Services Pty Ltd (currently named Golden Financial Group Pty Ltd) (NSG) for breaches of the best interests duty introduced under the Future of Financial Advice (FOFA) reforms.

The penalty relates to financial advice provided to retail clients by NSG advisers on eight occasions between July 2013 and August 2015. The clients were commonly sold insurance and advised to roll over superannuation accounts that committed them to costly, unsuitable and unnecessary financial arrangements.

The Court found that the failures by NSG to ensure compliance by its representatives were systemic in nature and in his reasons, Justice Moshinsky said, “I regard the contraventions as very serious ones”.

In March 2017 NSG consented to the making of declarations against it and after a hearing on 30 March 2017 the Court was satisfied that declarations ought to be made.

The Court found that NSG’s representatives breached:

  • s961B of the Act by failing to take reasonable steps to ensure that they provided advice that complied with the best interests obligations; and
  • s961G of the Act by failing to take reasonable steps to ensure that they provided advice that was appropriate to its clients.

Those breaches formed the basis of 20 contraventions in total by NSG of s961K(2) or s961L of the Act, which provides that a financial services licensee must take reasonable steps to ensure its representatives comply with the above sections of the Act.

The Court made the declarations based on a number of deficiencies in NSG’s processes and procedures, including the following:

  • NSG’s training on legal and regulatory obligations was insufficient to ensure clients received advice which was in their best interests;
  • NSG did not conduct regular or substantive performance reviews of its representatives;
  • NSG’s compliance policies were inadequate, and did not address its representatives’ legal or regulatory duties, and in any event, were not followed or enforced by NSG;
  • There was an absence of regular internal audits, and the external audits conducted identified issues which were not adequately addressed nor recommended changes implemented; and
  • NSG had a “commission only” remuneration model, which meant that representatives would be paid by way of commission for sales of personal risk insurance products and superannuation rollovers.

ASIC Deputy Chairman Peter Kell said, “This outcome makes clear to the industry the serious consequences of financial services licensees failing to comply with their FOFA obligations.  ASIC will continue to pursue licensees who fail to do so.”

NSG, who agreed with ASIC on the amount of the penalty immediately prior to the hearing on penalty, and made joint submissions as to the orders, was also ordered to pay $50,000 in costs to ASIC, and will also pay $50,000 towards ASIC’s costs of its investigation into NSG under s91 of the ASIC Act.

Westpac Reveals ‘PayWear’ Wearable Payment Technology

Given the stalemate with Apple Pay, it is interesting to see the recent announcement that Westpac customers will soon be able to tap-and-pay hands-free with the announcement of a new wearable payment option, ‘PayWear’.  “Westpac PayWear uses the same contactless payment technology as your Debit Mastercard®. You simply tap the accessory wherever contactless payments are accepted and the transaction will be debited from your everyday bank account”.

Westpac 'PayWear'

PayWear Essentials, available early December, includes a silicone band and a ‘keeper’, which can be easily attached to an existing watch or fitness band, containing a microchip (PayWear Card) linked to the customer’s everyday transaction account.

Customers can tap and pay in the same way they regularly do with their debit card, without having to reach for their wallet or smartphone, through the new range of waterproof and battery-free wearable accessories.

Westpac Group Chief Executive, Consumer Bank, George Frazis said customers across the country embrace greater convenience and expect to be able to simply tap-and-pay.

“Australia has the highest contactless penetration in the world, and cards continue to replace cash as consumers demand convenience. We’re always looking for new ways to help make our customers’ lives easier, and with our new PayWear products, customers will be able to pay on-the-go, in one hands-free step.

“With PayWear, there is no need to search through a bag, login to an app or worry about battery life. It will be on the go with our customers and ready for use when they are.

“When speaking with customers, personal style and choice were important. In fact, 70% agreed that they would only wear a wearable device if it suited their own personal style and lifestyle. This is why we will collaborate with iconic Australian designers to create a variety of wearable accessory designs to suit different tastes, preferences and styles,” Mr Frazis said.

The first Australian designer to be announced, who will design a range of unique products for Westpac PayWear, is award-winning surfboard shaper and entrepreneur, Hayden Cox of Haydenshapes. A range of leading Australian designers will be hand-picked to speak to a wide mix of everyday Australians – from surfers and fitness fanatics, to busy parents, professionals and festival-goers.

Hayden Cox says the opportunity to collaborate with Westpac has been a natural fit when it comes to designing products that are innovative, functional and stylish.

“Functional design is something I’ve always been passionate about – particularly technology and products that improve experiences for people. It was this passion which led me to creating and filing a patent on my parabolic carbon fibre surfboard construction, FutureFlex, and wanting to uniquely design my product to improve the surfing experience.

“Working with Westpac to create an exclusive range of wearable accessories which evolve the way people make contactless payments is exciting to me. This product signals an inevitable and innovative progression of our everyday routines. While some customers may opt for the simpler Essentials range, there is also a part of the market that will want something with a little more flavour. This is where the products I’m designing will sit.”

All Westpac customers with an everyday banking account eligible for a Debit Mastercard® will be able to order a PayWear Card online via Westpac Live, which can be inserted into the PayWear accessory of their choice. The PayWear Essentials range of wristband and keeper will be available from December. The Designer range is due to be available to customers in early 2018.

Westpac customers will be able to use PayWear to make purchases on all contactless-enabled terminals.

“Unlike many other wearable payment options, our customers don’t require an expensive device to access this technology. Customers will be able to get a PayWear Essentials accessory free of charge for a limited time, making it accessible to all our everyday banking customers,” Mr Frazis said.

The announcement of PayWear builds on the Westpac Group’s strong history of digital innovation, as the first to introduce internet banking to Australia, and the first in the world to deliver fingerprint sensor technology (Touch ID) to mobile banking logon in 2014.

Firstmac Now The 14th Largest Lender

Firstmac, one of Australia’s largest non-bank lenders, has hit a new milestone with $9 billion in mortgages under management and added more than $1 billion to its loan book in just four months. This follows a spike in broker accreditations, and provides more evidence of a surge in mortgage lending to non-traditional lenders, as banks tighten their underwriting standards.

From The Adviser. The milestone follows three consecutive months of record broker settlements and high numbers of new broker accreditations.

“In a highly concentrated market, Firstmac is one of the few players that is going against the flow and beating the banks at their own game,” Firstmac founder Kim Cannon said.

“We are offering brokers and their clients a genuine alternative to the banks with innovative products that are attracting the highest quality borrowers.”

Mr Cannon added that brokers had played a key role in Firstmac’s success and would continue to underpin the company’s growth in the coming years.

“Brokers play an important role in our business and that role is only becoming stronger, with a steady increase in broker usage over the past year,” Mr Cannon said.

“I would like to thank the brokers who have helped us reach $9 billion. With their help, we are well on the way to reaching our next target of $10 billion under management.”

Firstmac now has $10.5 billion in loan facilities, of which $1.5 billion is held in undrawn, redrawable offset facilities.

Since March 2017, the group has issued $2.7 billion in Residential Mortgage Backed Securities (RMBS) to a range of Australian and overseas institutional investors.

Firstmac priced a $1.0 billion RMBS issue in September and $1.7 billion RMBS issue in March.

The non-bank said that it is now the 14th largest residential mortgage lender in Australia, ahead of Citbank, Heritage Bank and Newcastle Permanent.

On The Digital Innovation Front Line

I had the chance to catch up with Martin McCann, the CEO and Co-Founder of Trade Ledger, the newly launched platform-as-a-service for business lenders and claimed as the world’s first open digital banking platform exclusively for business lending. The platform, they say, will help banks assess business lending risk in real time and will so address the US$1.7 trillion global under-supply in trade finance lending, so providing high-growth companies with much-needed working capital.

Martin McCann, the CEO and Co-Founder of Trade Ledger

Martin McCann has a long history is tech, including time with SAP in their Business Networks Division, and applied this experience to seeking out the best fit opportunities as companies digitise their supply chains. He thinks businesses, especially those in the mid-market who are growing fast, are completely underserviced by banks and other financial institutions, and so built Trade Ledger to close the “last mile” gap between these firms and their lenders; something which is now possible thanks to the migration of business data into the cloud.

McCann says he does not see Trade Ledger as a Fintech, as it does not lend to firms directly, but rather is a technology company which via its platform, facilitates the connection between lenders and businesses. And he has ambitious growth plans, not just in Australia but beyond over the next 3 years.

Targeting mid-market firms, with a turnover of around $20-100m, the platform ingests data from their invoicing and accounting systems via an open api, (and can also pull information from enterprise systems like SAP), as well as trading documentation, financial information, bank statements and credit bureau data.   Trade Ledger also has its own trade invoicing solution, which can also be used. They apply custom analysis to these datasets on the platform.

Trade Ledger Platform

Then they work with Lenders who want to use the platform, getting the lending, risk and product teams in the bank to define their trade finance underwriting processes, giving the opportunity to transform these processes, before customising the Trade Ledger platform to meet their specific credit assessment requirements.

Once set up a lender can make trade finance lending decisions more quickly, and accurately, and McCann says the business case to these banks is very compelling. Currently they have a couple of Australian non-bank specialist lenders on the platform, and expect a global top-20 bank to come on board soon.

And here is the rub, their experience to date has been that banks in Australia may recognise that Fintechs should not be regarded as competitors, but rather partners (something which has changed relatively recently); but the process of working inside their slow and complex decision making machinery means lenders are missing the boat. In fact, McCann points to the UK, where lenders are up for the challenge, and cites examples of organisations who say within 4 weeks of engaging with a new concept, they guarantee a decision, so as not to waste time. Hence the global focus.

McCann and his team are clearly on a mission, and already have plans to bolt in additional added value functionality into the platform, based on artificial intelligence and machine learning which can leverage the rich data in the system.

Whilst he sees potential for Blockchain down the line, they are focussing on accurately predicating the probability of default and fraud within a firm and transaction set, complete with confidence scores. This should be operational in 1Q 2018. This will enhance the lenders underwriting ability and provide greater benefits across the value chain.

Another innovation which he calls Conversational Commerce, is aimed at the owner of the business, by providing analysis of their working capital and offering these insights by a bot, thus enabling the owner to benefit from the knowledge and experience contained in the platform. This solution will appear sometime next year.

So this is one to watch. They have spotted a real niche, are harnessing the best of digital transformation to help firms source the trade credit they need to grow, and assist lenders to improve their underwriting processes and operational efficiency. Through their open platform, they are, we think, on the Digital Innovation Front Line.

US Banks’ Net Interest Margins Are Still Increasing

The ANZ Net Interest Margin (NIM), reported last week was 1.99%, and typically banks in Australia are achieving a NIM slightly above this. So, it was interesting to see this note from Moody’s, discussing the NIM of US banks, which has risen to 3.21%, and continues a positive trend over the past year.

Last week, US banks’ reported third-quarter earnings and higher net interest margins (NIM), a credit positive because NIM is a key driver for net interest income, which accounts for more than half of most banks’ net revenue.

Quarter over quarter, the average NIM for the largest US regional banks increased three basis points (Exhibit 1) to 3.21% from 3.18%, continuing a four-quarter positive trend. However, the rate of improvement is slowing. The Federal Funds rate increased 25 basis point (bp) in each of the past three quarters. However, as the bars show, the rate of improvement for listed regional banks’ average NIM has declined each quarter.

Accelerating deposit costs explain why the NIM is not increasing at a consistent rate with each 25 bp increase in the Federal Funds rate. Exhibit 2 shows deposit betas for total deposits (interest-bearing and noninterest-bearing) for each of the past three quarters. Deposit beta is the increase in cost of deposits relative to the increase in the Federal Funds rate. There was a significant step up in beta in the second quarter, which continued in the third quarter. In their earnings calls, most bank managements indicated that retail deposits are not repricing upward, despite the rise in market interest rates. This is not the case with deposits from the banks’ wealth management clients, and especially from their commercial clients, which are both more price sensitive.

Auction Results 28 Oct 2017

We have the preliminary results from Domain, which underscores the gap between the momentum in Sydney and Melbourne. Total listings and clearance rates were significantly higher down south.

In addition, while Brisbane achieved 39% on 135 scheduled auctions, Adelaide, reached 69% of 96 scheduled (at a clearance rate HIGHER than Sydney!) and Canberra cleared 82% of 100 scheduled, the highest in the country. This chimes with our surveys, which shows significant numbers of property investor switching away from Sydney and towards both Canberra and Adelaide, where property is more reasonable, and where tenants are paying, on a net rental basis, higher rates.

So the question is, will Sydney continue to stall, as prices continue to slide, and will the same falling trends begin to spread to the more buoyant states?

We are on a knife edge…!

Asleep At The Wheel? – The Property Imperative Weekly 28 Oct 2017

Another big week of finance and property news, so we pick over the bones and try to make sense of what’s going on. And we ask were the Regulators asleep at the wheel?

Welcome to the Property Imperative weekly to 28th October 2017. Watch the video or read the transcript.

We start this week’s review with a look at the latest economic data. The latest GDP read from the US, at 3.1% annualised, in Q2 and 3.0% in Q3, provides more support to the view the FED will lift their benchmark rate again before the end of the year. This is likely to have a flow on effect by rising rates in the international capital markets, which will mean higher bank funding costs here, as well as putting downward pressure on the toppy stock market. To confirm this view, we saw the benchmark 10-year Treasury Bond Yield in the USA rose to its highest rate in several months.

In Australia, the ABS said the CPI was 0.6 per cent in the September quarter 2017 following a rise of 0.2 per cent in June. The most significant price rises were electricity (+8.9%), tobacco (+4.1%), international holiday travel and accommodation (+4.1%) and new dwelling purchase by owner-occupiers (+0.8%). These rises were partially offset by falls in vegetables (-10.9%), automotive fuel (-2.3%) and telecommunication equipment and services (-1.5%). The CPI rose 1.8 per cent through the year to September quarter 2017 having increased to 1.9 per cent in the June quarter 2017, below the RBA’s 2-3% target band.

The RBA’s Guy Debelle spoke about some of the uncertainties in taking the economic temperature in Australia. He homed in on the CPI data from the ABS, making the point that our belated quarterly CPI reports are out of kilter with the monthly data now provided in many other western countries. In addition, the ABS will be revising their expenditure weightings in the CPI series, which means that CPI may currently be over stated by perhaps a quarter of a percent. These revisions are made every 5 or 6 years, although there are plans afoot to make them more frequently. The ABS is under tremendous funding pressure, and there are risks their critical data series may be compromised.

The National Accounts data from the ABS for the year 2016-17 really brought home how much of the growth in the economy was thanks to household consumption, as opposed on business or government investment. This helps to explain why the RBA was willing to let household debt escalate to their current astronomical levels, why rates are so low, and why the property sector is so important.  In summary, overall growth was 2%, the lowest since 2008-9; wages rose 2.1%, the weakest since 1991-2; growth in household expenditure as measured in current price terms was 3.0%, the lowest on record; the household saving ratio was at its lowest point (4.6%) in nine years and yet household consumption was the strongest growth driver at 1.22 percentage points.

This was because households borrowed an additional $990 billion over the 10 year period from 2006-07, mainly in mortgages. The value of land and dwellings owned by households increased by $2.9 trillion over the same period and increased by $621 billion through 2016-17 and despite slow wage growth, household gross disposable income plus other changes in real net wealth increased $456.6 billion, or 32.6%, in 2016-17, largely due to a $306.5 billion appreciation in the value of land held by households.

But of course, such high debt and high property prices are now creating fault lines in the property market and household finances.

We are seeing more risks in the property investment sector. Traditionally, in the Australian context, loans to property investors have tended to perform better than loans to owner occupiers. This is because investors receive rental income streams to help pay for the mortgage costs, they are willing to carry the costs of the property against future capital gains, and many will be able to offset costs against tax, especially when negatively geared. In addition, occupancy rates in most states have been stellar.

But things are changing, as the costs of borrowing for investment purposes have risen (thanks to the banks’ out of cycle rises), while rental returns are flat, or falling and the costs of managing the property are rising. In addition, the supply of investment property is rising, and occupancy rates are declining in a number of key markets. As a result, more investors are seeing net rental yields – after mortgage payments and other costs drifting into negative territory, especially in VIC and NSW.  Our Core Market Model, and recent data from ANZ suggests defaults from the property investment sector are now running at similar levels to owner occupied borrowers, and are set to rise further.

In fact, the ANZ full year result, which superficially looked strong – up 18% on the prior comparable period – contained a number of negative trends, as they focus more on the retail business in Australia and New Zealand.  Yes, they have a strong balance sheet, as capital is released from their assets sales, and provisions were down; but the underlying net interest margin fell, down 8 basis points on last year to 1.99%, with a fall of 2 basis points in 2H, despite the mortgage book repricing and loan switching. In addition, 90-Day mortgage defaults overall remained similar to last year, but with a spike in WA and a fall in VIC/TAS. Investment loan delinquencies are rising, whereas they have traditionally been lower than OO loans. They have recently tightened underwriting standards, but of course loans already on their books have looser standards. They warn “household debt and savings have both increased, however the ability for households to withstand economic shocks has diminished a little”. “In 2018 we expect the revenue growth environment for banking will continue to be constrained as a result of intense competition and the effect of regulation including a full year of impact of the Australian bank tax.”

Our own analysis of default probability, from our Core Market Model, now includes 90-day default risk modelling.  We measure mortgage stress on a cash flow basis – the October data will be out next week – and we also overlay economic data at a post code level to estimate the 30-day risk of default (PD30). But now we have added in 90-day default estimates (PD90) and the potential value which might be written off, measured in basis points against the mortgage portfolio. We also calibrated these measures against lender portfolios. Granular analysis can provide a rich understanding of the real risks in the portfolio. Risks though are not where you may expect them! If we look at the results by state, WA leads the way with the highest measurement, then followed by VIC, SA and QLD. The ACT is the least risky area. In WA, we estimate the 30-day probability of default in the next 12 months will be 2.5%, 90-day default will be 0.75% and the risk of loss will be around 4 basis points. This is about twice the current national portfolio loss, which is sitting circa 2 basis points.

Banks are cracking down on loans to borrowers buying into Brisbane’s over-supplied apartment market, with a number of risky postcodes identified, which require bigger deposits. The four major banks – Westpac, Suncorp, Australia and New Zealand Banking Group (ANZ), and National Australia Bank (NAB) – are restricting lending for certain Brisbane postcodes, where apartment buyers will now be required to have a deposit of up to 20% to qualify for a home loan. Suncorp has blacklisted nearly 40 postcodes in the Queensland capital, including Inner Brisbane, Teneriffe, Fortitude Valley, Bowen Hills, and Herston. The banks are refusing to loan more than 80% of the cost of a unit due to “[weaknesses] in the investment market” as well as the current oversupply in inner-city apartments. Prices for apartments in Inner-Brisbane have dropped to their lowest level in three years.

QBE’s Housing Outlook, published this week, suggests home price growth will slow further in the years ahead. We continue to see appetite from property investors easing, as property price growth stalls or in some states reverse. Banks on the other hand are chasing new business with deep discounts on new loans. For example, Teachers Mutual cut their rate for new loans by 30 basis point, to 3.84%.  Westpac, St George, BankSA and Bank of Melbourne all introduced promotional discount rates, with rates down by up to 20 basis points. Bank West also offered discounts to both new owner occupied and investor borrowers. So, the war chests created by the back book repricing earlier in the year – especially investor and interest loans are being used to target new business. As a result, we expect to see a hike in refinancing, especially in the lower LVR owner-occupied sector, as borrowers seek to reduce their monthly outgoings.

We also showed that more households seeking a mortgage are generating multiple applications, sometimes direct to a bank, and sometimes via mortgage brokers, as they seek to find the best deals. More applications are made via online systems, which make the process easier, but the net result of all this is that mortgage conversation rates have fallen from around 80% to 50%, creating more noise, and costs in the system. We think this is a direct results of the banks’ so called omni-channel approach to distribution, which will turn out to be quite costly.

Following the concerns expressed recently by RBA and ASIC on the risks to household finances, finally, we got an admission from APRA that mortgage lending standards have decayed over the last decade, and that they needed to take action to reverse the trend. And now they are looking at debt-to-income. Poor lending standards, they say are systemic, driven by completion, and poor bank practices. They recently intervened (a little). And late to the piece (now) debt-to-income is important. Did you hear the door slamming after the horse has bolted?

The Treasury added their voice this week, when John Fraser, Secretary to the Treasury, gave an update on household finances and housing as part of his opening statement to the October 2017 Senate Estimates.  He expressed the view that debt is born by those with the greater capacity to repay but this belies the leverage effect of larger loans in a rising interest rate environment. He said that “while banks’ progress against these measures has been positive, regulators will need to think carefully about whether future efforts to maintain financial stability should lean against cyclical excesses or address structural risks within the financial system”.

So, we have the full Monty, with all four members of the shadowy “Council of Financial Regulators” expressing concerns about household debt and home price risks. A completed change of tune from the declarations of 2015 when everything was said to be just dandy!

Now those following this blog over the past few years will know we have been flagging these concerns, especially as the cash rate was brought to its all-time low.  We said DTI was critical, that standards should be tightened, and the growth of debt to income was unsustainable.

All members of the “Council of Financial Regulators” which is chaired by the RBA are culpable.  This body, which works behind the scenes, is referred to when hard decisions need to be take. If you look back at recent APRA and RBA statements, the Council gets a Guernsey! The problem is there has been group-think for year, driven by the need to use households as a growth proxy for the failing mining and resource sector. And no clear accountability. But too little has been done, too late.  And it is poor old households who, one way or the other will pick up the pieces – not the banks who have enjoyed massive profit and balance sheet growth. Even now, lending for housing is growing three time faster than incomes or cpi. Regulators are now lining up to call out the problems. Managing the risk going forwards is a real challenge. It’s time to review the regulatory structure and remember that the Financial System Inquiry recommended the creation of a new Financial Regulator Assessment Board to assess the performance of the regulatory framework, but this was rejected by the Government! That could prove to be a costly mistake.

And that’s the Property Imperative Weekly to 28th October 2017. If you found this useful, do leave a comment below, subscribe to receive future updates and check back next week for the next installment.

US GDP At 3% Says FED Likely To Raise Rates

According to the US Bureau of Economic Analysis real gross domestic product (GDP) increased at an annual rate of 3.0 percent in the third quarter of 2017, according to the “advance” estimate released by the Bureau of Economic Analysis. In the second quarter, real GDP increased 3.1 percent.

The Bureau emphasized that the third-quarter advance estimate released today is based on source data that are incomplete or subject to further revision by the source agency. The “second” estimate for the third quarter, based on more complete data, will be released on November 29, 2017.

The increase in real GDP in the third quarter reflected positive  contributions from personal consumption expenditures (PCE), private inventory investment, nonresidential fixed investment, exports, and federal government spending. These increases were partly offset by negative contributions from residential fixed investment and state and local government spending. Imports, which are a subtraction in the calculation of GDP, decreased.

The deceleration in real GDP growth in the third quarter primarily reflected decelerations in PCE, in nonresidential fixed investment, and in exports that were partly offset by an acceleration in private inventory investment and a downturn in imports.

Current-dollar GDP increased 5.2 percent, or $245.5 billion, in the third quarter to a level of $19,495.5 billion. In the second quarter, current-dollar GDP increased 4.1 percent, or $192.3 billion.

The price index for gross domestic purchases increased 1.8 percent in the third quarter, compared with an increase of 0.9 percent in the second quarter. The PCE price index increased 1.5 percent, compared with an increase of 0.3 percent. Excluding food and energy prices, the PCE price index increased 1.3 percent, compared with an increase of 0.9 percent.

Mastercard and Partners Show Augmented Reality Shopping

From Brand Channel.

As shoppers look for more secure payment transactions and engaging in-store and online/mobile experiences, Mastercard is using augmented reality to deliver on that as well as enhance the overall retail experience.

Mastercard chose Money20/20 in Las Vegas this week to demonstrate how its Masterpass solution seamlessly enhances an AR-based retail shopping experience that uses iris authentication for a simpler, security-focused solution.

In Mastercard’s vision, shoppers can view digital representations of products before purchase, learn more about them and see additional options not available in the physical location along with access to instant recommendations.

To complete a purchase, users can pay using Masterpass and iris authentication, technology developed by Qualcomm, selecting a card from their Masterpass-enabled wallet and press the Masterpass button on the screen. Items can be taken home or shipped depending on availability.

“At Mastercard, we are seeing major shifts in how commerce is conducted, as people lead increasingly connected, digital lifestyles,” stated Sherri Haymond, EVP, Digital Partnerships, Mastercard.

“As the physical and digital worlds blend together, we are focused on developing solutions that provide merchants with the ability to accept payments across all technology platforms possible—in-store, in-app, online, and in AR and VR—to help drive how people will experience shopping and payments in the future.”

In Las Vegas, the partners also used the Saks Fifth Avenue brand, marks and likeness to showcase the physical retail environment.

Neeraj Bhatia, Director, Product Management, Qualcomm Technologies, Inc. said in the release, “Qualcomm Technologies’ iris authentication and extended reality technologies for Snapdragon 835 are designed to support a future generation of contextually aware commerce experiences using secure, augmented reality. We are delighted to work with Mastercard and Saks Fifth Avenue to showcase new AR experiences on ODG’s sleek smart glassed based on our Snapdragon 835 Mobile Platform.”

The partners designed a Money20/20 experience to inspire brands and merchants to dream up new ways of enhancing the in-store shopping experience. Part of it is about drive sales by delivering additional content and information during shopping, leveraging:

  • Masterpass, the digital payment service from Mastercard, and Identity Check Mobile, which enables users making purchases to authenticate with physical traits including fingerprint, facial and voice recognition software;
  • ODG’s expertise to lead the development of the AR shopping experience, as well as its award-winning extra-wide-field-of-view R-9 smartglasses with enhanced iris tracking cameras; and
  • Snapdragon 835 Mobile Platform running the Snapdragon XR SDK and iris authentication technology with liveliness detection for a superior authentication experience.

Mastercard is betting on AR to “reshape the retail environment, making it more immersive and efficient.”

Ralph Osterhout, Founder and CEO at ODG said in the release, “This solution showcases the transformative nature of augmented reality in the retail space and highlights the power and performance of ODG smartglasses and the unparalleled potential for headworn AR to change the way we see and experience the world.”

Michael Miebach, Mastercard, Chief Product Officer explained the company’s ambitions for impacting “the lives of the underbanked and underserved.”

ATO warns ride-sharing drivers about GST obligation

From Smart Company.

The Australian Taxation Office has put the hard word on ride-sharing drivers and the wider gig economy, reminding drivers working for platforms like Uber about the importance of meeting their GST obligations next tax time.

The tax office determined in 2015 that ride-sharing and ride-sourcing drivers should be classified in the same way as taxi drivers for GST purposes, meaning they must register for an Australian Business Number and for the GST even if they are under the $75,000 threshold.

Uber appealed the decision in the Federal Court earlier this year but lost, and since then the ATO has been periodically reminding drivers of their tax obligations.

However, the tax office says the message isn’t getting through, with ATO assistant commissioner Tom Wheeler saying in a statement that the tax office has notified over 120,000 ride-sharing drivers over the past 18 months regarding their tax obligations.

“We know that most drivers do the right thing, and we are now focusing attention on the minority of drivers that are not currently meeting their obligations,” Wheeler said in a statement this morning.

“Our message to taxpayers is that if you have a ride-sourcing enterprise you must get an Australian Business Number and register for GST as soon as you start driving. You also need to include the income on your tax return at tax time.”

Wheeler notes the ATO is sourcing information “directly” from banks and facilitators, and warns “we know who you are, and we know if you aren’t correctly meeting your obligations”.

“This isn’t a black economy issue,” says Lisa Greig, SME and start-up tax specialist at Perigee Advisers.

“The money’s going through Uber and into a bank account, [and] it will be found.”

Companies should remind workers of GST obligations

Wheeler says if ride-sharing drivers who have not registered for GST continue to ignore the ATO’s prompts, the tax office will register the drivers itself and then backdate the registration to their first ride-sharing payment.

“[The drivers] will be required to lodge and pay all outstanding tax obligations. Penalties and interest may also be applied,” he says.

Greig tells SmartCompany she believes many of these outstanding cases would be drivers who maybe did a few trips for a ridesharing app over a couple of weeks, made around $60 dollars, and then haven’t driven again.

“Those people still have to be registered for GST,” she says.

Businesses who employ a significant number of these ride-sharing type contractors – such as Uber – should have a “duty of care” to inform workers of their GST obligations, believes Greig.

SmartCompany understands Uber drivers are directed to the ATO’s ride-sharing information page and notified of their obligation as part of the signup process, but Uber is unable to sign them up when a driver registers on the platform, because Uber not a registered tax agent.

Other companies working with similar types of contractors should take a similar course in informing them about GST obligations, because companies should make it “as simple as possible” for workers.

However, one reason the ATO is having to chase people now might come down to the slackness of the drivers, Greig says, suggesting that signing up for an ABN and GST would likely take less time than signing up to drive with Uber.

“People who forget to register for GST are like those people who forget an old bank account has $2 of interest in it when it comes to tax time.”

Looking to the future of tax reporting, Greig says it won’t be surprising if Uber driving income is automatically detected by the tax office in future.

“But with where this is all going, in the future all your ride-sharing data will just get populated in MyTax come tax time and you won’t have to worry.”