Australia pushes ahead with open banking reforms
Advance Australia fair! The nation’s government plans to introduce open banking reforms from mid-next year.
Unsurprisingly the news was welcomed by fintech organisations.
Stuart Stoyan, chair of industry body Fintech Australia, says it will be a “game-changer for consumers and businesses” and “drive a new wave of fintech innovation and growth”.
As reported on 8 May, the 2018-19 Australian budget cast rays of sunshine upon fintech’s fine and noble face. This included funding measures for blockchain, artificial intelligence (AI) and machine learning
Stoyan was a bit downbeat at that time as open banking was off the menu. But two days later he’s back in a happy place.
He adds: “Finally, customers will be able to use a regulated system to unlock the power of their own data to get access to financial services better tailored to their needs.
“This reform is expected to force downward pressure on lending costs, allow people to more easily manage their budget and be able to shop around for the best investments. They will also be able to easily switch their bank accounts to new fintech challenger banks. Put simply, this means better customer outcomes.”
The government has accepted the timeframe proposed by the Farrell report (i.e. the open banking review), which was also endorsed by Fintech Australia, to introduce the first phase of the open banking reform within 12 months of a government decision.
This means customers of the big four banks – ANZ, CBA, NAB and Westpac – will be able to use this reform to pass on their transaction, deposit and debit and credit card data to other accredited financial services providers by July 2019.
The government has however decided to delay mortgage data access to February 2020, with all other data identified in the Farrell review to be available from July 2020, with this expected to include personal loans.
The Australian Banking Association (ABA) had been arguing for an 18-month timeframe for the introduction of the first phase of open banking (including product information and transaction data) and for this timeframe to only begin after parliament passes legislation. It was also arguing for all mortgage and lending data to be included at an unspecified later date.
According to Fintech Australia, the government has also decided to accept its arguments to include data from joint accounts in the reform’s first phase. The ABA had also argued against this.
“We are pleased that the Australian Government has stood up to the big banks, which wanted to delay this reform into the never-never and significantly reduce the amount of data consumers could access,” says ZipMoney chief strategy officer Tommy Mermelshtayn, who is a co-lead of Fintech Australia’s open banking policy working group.
This last comment is a common theme from Australian firms and start-ups. They usually have acerbic things to say about the big four banks.
These reforms are also taking place in the wake of the Royal Commission on banking misconduct.
As an example, and as reported in January, ANZ’s CEO sent a long letter to his staff urging the restoration of customers’ trust.
To give you some background, in the aftermath of the “Global Financial Crisis”, the Financial System Inquiry found ANZ knew more than 80,000 Australians lost billions of dollars due to the collapse of managed investment schemes, poor financial planning advice and other misconduct.
People, unsurprisingly, got well and truly annoyed with banks – and according to the ANZ CEO this included the size of its profits, “the amount of money senior executives earn, how hard it can be to switch banks” and “the unfairness of many fees and charges”.