Banks welcome phased launch of open banking

Banks will cede control of card, deposit and transaction account data back to their customers by July 1.

Australian Bankers' Association CEO Anna Bligh. Picture: AAP

Banks have welcomed the federal government push into open banking, with Australian Banking Association chief Anna Bligh saying the latest reforms strike the right balance between giving customers more freedom without compromising their security.

Treasurer Scott Morrison on Wednesday announced a phased launch of open banking, which will have banks cede control of credit and debit card, deposit and transaction account data back to their customers by July 1.

They will also, over time, open up mortgage data and personal loan information by 2020.

The reform is based on the recommendation handed down in a report produced by King & Wood Mallesons partner Scott Farrell, which was released in February this year.

According to the report, customers needed to be in full control of how data is used, with consent an important part of how information is shared between parties.

Under the regime, customers will also be able to share their personal information with other financial institutions to allow them to find a better deal on expenses such as electricity bills, telecommunications and other items.

Ms Bligh said that the phased approach will allow banks to build the right framework around data sharing and allow them to design a secure system which benefits Australian consumers.

“The industry is pleased that the government has outlined a phased introduction that enables it to design a good system the will both benefit customers and protect their data.

“Banks are committed to delivering this reform within the tight timeframe and are looking forward to seeing further details contained in the draft legislation as soon as possible,” she said.

The reform has also won praise from the fintech sector, which has been clamouring for change for some time.

Online lender Spotcap’s ANZ managing director Lachlan Heussler said that the move is good news for consumers and also small businesses.

“Open banking has undeniable benefits in terms of consumer choice and experience. It will break down barriers, encourage competition and help consumers save money through improved price comparison and service switching options,” he said.

“As a fintech that is committed to empowering Australian businesses with accessible finance, Open banking will allow us to serve customers in a much faster, safer and scalable way.”

FinTech Australia chair Stuart Stoyan said that that the government’s compromise position, while not ideal, was still a major step in the right direction.

The 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 the 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 measures announced on Wednesday set a timeline to when all of the data is made open and also brought forward the implementation of the first phase of the program.

Mr Stoyan said that the reform will bring costs down for consumers.

“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,” he said.

“They will also be able to easily switch their bank accounts to new fintech challenger banks. Put simply, this means better customer outcomes.”

Australian Competition & Consumer Commission chairman Rod Sims has also backed the move, saying that it will be a net positive for competition on a number of fronts.

“We expect the scheme to encourage competition between service providers, leading not only to better prices for customers but also more innovation of products and services.”

According to the federal government, the ACCC will be responsible for promoting competition and customer-focused outcomes within the system, while the Office of the Australian Information Commissioner will ensure that privacy protection is a fundamental feature of the system.

Data61, the data arm of the CSIRO, has been picked to perform the role of a Data Standards Body, developing technical standards for the system in collaboration with industry, fintech outfits, and consumer and privacy groups.