Raiz wants ePayments Code overhauled to level financial services playing field

Raiz Invest Limited, the largest, mobile-first financial services platform with more than 700,000 sign-ups, is urging an overhaul of the ePayments Code as one critical measure to increasing competition and level the playing field between the established financial players and the emerging Fintech sector.

In its detailed submission to the Select Committee on Financial Technology and Regulatory Technology that is inquiring into the FinTech and RegTech sectors, Raiz argues that the Consumer Data Rights (CDRs) legislation creates an unfair advantage for incumbents and that the ePayment Code needs to be amended to ensure the system does not disadvantage any market player.

Raiz CEO George Lucas says: “The political and regulatory environment continues to favour a ‘Big Four’ bank policy, a reality confirmed by the passing of the CDRs legislation. This means the playing field is anything but level, remaining significantly skewed in favour of the ‘Big Four’ and the Apples and Googles of this world.

“Comparing the Australian Open Banking regime to the European Open Banking regime, as some submissions have done, is ludicrous. In Europe, the same privacy rules apply to the incumbent’s data as they do to the data recipient using Open Banking so there is no double standard favouring the incumbent.

“In Australia, this is definitely not the case, where the Privacy Safeguards mean significantly tougher privacy rules apply to FinTechs that are the recipents of Open Banking data compared with the incumbent banks, with the four major banks holding 90% of the data.”

Lucas says that despite public announcements by Government about support and encouragement for FinTech innovation in Australia, this Government-mandated banking oligopoly still has the active support of legislators, regulators and Treasury (the findings of the Financial Services Royal Commission notwithstanding).

“This double standard created by the Privacy Safeguard is a powerful disincentive to financial innovation and FinTech investment, and Raiz is firmly of the view that significant changes to the legislative framework must be made to allow Fintechs to compete and flourish.

“Modification to the ePayment Code is a solution to this and the government should have addressed this when the recommended changes were made in the Financial System Inquiry that was handed down in late 2014.”

Raiz recommends three ways to reassure customers providing Fintechs with their Pass Code that their data is secure. They are:

• They are not breaching the Pass Code requirements in the Code;
• They are not breaching their terms and conditions with their incumbent bank; and
• They remain protected by their incumbent bank against unauthorised transactions.

Aside from changes to the ePayments Code, Raiz also wants the unfair streamlined accreditation process for ADIs abolished.  FinTechs will need to prove that they are “fit and proper” to be accredited.  “But a CBA or Westpac, which have been investigated or fined by Austrac for abuse of the Anti-Money Laundering rules, or have pleaded guilty to criminal charges, are still automatically considered ‘fit and proper’ despite the damning findings of the Royal Commission.”

Lucas concludes: “Amending the Code will significantly contribute to a more positive regulatory environment for FinTechs, as well as removing competitive barriers to FinTech innovation, thereby increasing investment and competition in the Australia financial services market. Otherwise Open Banking will simply be a compliance tool for lenders to meet their responsible lending obligations.

“What also has to be understood is that by reducing the ability of the ‘Big Four’ to stifle competition in financial services will ultimately benefit all Australian consumers. Surely this should be the key goal of the Government.”