New regulator needed to cut the queue for open banking

Open banking would make it easier for big bank customers to switch to other providers.

A new regulator is not on the wish list for many businesses. But fintechs want help to focus on the backlog of applications to join so-called open banking, which allows the sharing of banking data.

Consumer data rights are meant to be the holy grail for bank competition, giving consumers an easy way to open the door to rivals of the big four, to let them handle your banking needs.

It sounds good in theory, although there are obvious privacy concerns in allowing anyone to simply run through the customer records of big banks. Also, not just anyone should be allowed to play the game.

Industry-specific regulators are anathema to good policy, because they tend to be captured by the industry, which is why economy-wide regulation works best in applying the same rules to different sectors.

The issue featured in a recent Senate report and the Australian Competition and Consumer Commission is fully supportive of the move to create a new body, along the lines of the Open Banking Implementation Entity in the UK.

Open banking now applies to credit and debit cards, but from November will apply to mortgages and personal loans, and from next February to business loans and foreign exchange transactions.

There are just two fintechs in the game today - Frollo and Regional Australia Bank. But around 70 are knocking on the door, seeking entry.

This costs in excess of $70,000 to have the right IT systems. Then there must be an independent assurance so the ACCC knows the system stacks up. You must be a “fit and proper person” and have the right insurance.

The government wants to roll data rights into energy, telecommunications and other sectors, which will take some effort to co-ordinate, when you consider the UK has around 200 people dedicated to just data rights for banking.

The new agency would obviously need the right IT systems, but it would serve a useful function in clearing the way for more competition for the established oligopolies in control of Australian banking, energy and telecommunications.

The ACCC would retain enforcement rights, with the most obvious cases being where people claim to be registered agents when they are not.

The Office of the Australian Information Commissioner would also have a role, although enforcement doesn’t appear to be one of Commissioner Angelene Falk’s strong suits.

The data rights agency would serve a role not dissimilar to ASIC’s registry service, which is slated to be transferred to the Australian Taxation Office.

The federal government is reportedly on board with the idea of a new regulator, and the agency will be unveiled shortly.

The end game should be a technology-led, more competitive economy, which is just what the post-COVID Australia needs.