Banks cautious about open data proposal

The major banks have cautioned against any expansion of the open banking regime.

The major banks have cautioned against any expansion of the open banking regime to enable outside players to write as well as read data until the proposed new system is working as expected.

In submissions to a Senate committee examining financial and regulatory technology, the major banks said they supported open banking, saying it could be transformative and lay the foundations for greater innovation and stronger competition.

However, National Australia Bank said expansion of the regime’s scope to include write-­access should await an assessment on progress: “This assessment should consider whether the intended outcomes are being achieved and the value customers are deriving from open banking.

“For example, the existing governance structure and accreditation requirements for CDR (the consumer data right) would need to be considered in the context of an extension to write access.”

Incoming open banking rules are designed to allow consumer banking data to be shared with accredited third parties. The aim was designed to give consumers power to drive better deals from lenders.

NAB also pushed for a level playing field for all participants, saying banks should not be put at a competitive disadvantage so other industry players could benefit.

Instead, the same regulatory and legislative framework should be applied to all.

All the banks are working hard on the implementation of read-only access for open banking under the consumer data right, which is due to start on July 1. The regimen is expected to drive a significant increase in the number of fintechs from an estimated 650 — more than double the level in 2015.

The Australian Banking Association said in its submission the consumer data right would be a transformative innovation for Australia, empowering consumers to use their own data and make more informed decisions about the financial products that are best suited to them. The nation, it said, should consolidate the regulatory responsibility for all elements of data management and privacy in the digital economy, replacing a system currently split across multiple regulators and government departments.

The ABA was less optimistic about regtech solutions, due to a number of challenges.

It supported a Deloitte report which said the sheer volume and complexity of new and existing regulations had had the unintended consequence of encouraging financial services providers to concentrate on compliance rather than innovation. Companies had also been cautious because of regulatory uncertainty.

“There is no easy solution to this problem,” the ABA said.

“Anecdotally, the ABA understands Australia is not currently perceived as an optimal market for regulatory technology innovations and start-ups. The perception is this jurisdiction is seen as excessively regulated, with regulations that are overly complex and subject to frequent change.”

The ABA recommended Treasury be given responsibility for a regtech growth strategy and guide ASIC, the prudential regulator and the Reserve Bank to make regtech a viable proposition.

Westpac supported the extension of the consumer data right to the superannuation sector in its submission, saying it would improve customers’ ability to compare and switch between funds and encourage competition.

“This would lead to both better prices for customers and the development of more innovative products and services, as all funds are put under increased pressure to retain members against competition from both incumbent providers and new fintech companies,” the bank said.

ANZ Bank urged the committee in its submission to consider multiple tiers of accreditation to receive data under the consumer data right. It said this would help lower barriers to entry and encourage innovation.

“These additional, lower tiers could allow accredited persons to receive different types of CDR data or insights based on that data. These lower tiers could impose fewer requirements on an accredited person because the risk would be lower,” the bank said.