Open banking framework to drive customer choice and innovation across Australia
Australia’s fintech industry has welcomed an Australian Government decision to put the customer first by pushing back against big bank delaying tactics and introducing open banking reforms from mid-next year.
“A government-backed open banking framework will be a game-changer for consumers and businesses, along with drive a new wave of fintech innovation and growth in Australia,” said FinTech Australia chair Stuart Stoyan.
“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, 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 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.
The government has also decided to accept the arguments of FinTech Australia 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,” said ZipMoney Chief Strategy Officer Tommy Mermelshtayn, who is a co-lead of FinTech Australia’s open banking policy working group.
“We argued strongly that including lending products in the reform’s early days could address responsible lending problems identified in the Royal Commission but also drive down excessive consumer credit card and mortgage costs.
“It’s no surprise that banks were fighting to delay the introduction of mortgage and credit card data, given these are among their most profitable areas.
“In saying this, there are many aspects to this reform that have either not been announced, or require close examination, and we look forward to working with all relevant government agencies to provide a great customer outcome.”
MoneyBrilliant CEO Peter Lalor, also a co-lead of FinTech Australia’s policy working group, said the government’s decision to introduce open banking as the first consumer data right sector, followed by energy and telecommunications, placed the fintech industry in the box seat in Australia’s consumer data revolution.
“This reform means that fintech companies will be first cab off the rank when it comes to complying with the new data standards and therefore will be best placed to unlock consumer choice and innovation in energy and telecommunications,” Mr Lalor said.
“It has always been our view that fintech is a broad enabler of productivity and innovation across a range of other sectors – rather than being limited to financial services. Today’s announcement reaffirms this view.”
Luke Howes, CEO of fintech data company Proviso, said he was pleased to see the open banking consumer data right would include data from both personal consumers and businesses of all sizes, including large businesses. The Farrell review had raised the prospect of limiting access by big businesses to the right.
“This shows that open banking has the potential to be enabler of business growth, alongside driving consumer empowerment and choice,” he said.