New laws will ‘open banking’

New laws expected to be passed today will “introduce an open banking regime in Australia” and empower consumers.

Victorian senator Jane Hume

New laws expected to be passed through parliament today will “introduce an open banking regime in Australia” and empower consumers to “compare and switch their financial providers”.

Superannuation, Financial Services and Financial Technology Assistant Minister Jane Hume says the new customer protections would “help boost competition for consumers” and further develop a “world-leading fintech sector”.

Senator Hume says the current system was “clearly not as competitive as it should be”, and customers who switched made “substantial savings”.

“Currently, fewer than one in five Australians who have credit cards or home loans switch providers in a five-year period. Two out of five Australians still use the bank account their parents set up for them. That’s seven million Australians who have never switched bank accounts,” she writes in The Australian today.

Josh Frydenberg this week stepped up the Morrison government’s legislative agenda to push through major reforms to the fin­ancial sector in the wake of the banking royal commission, moving on a recommendation by Kenneth Hayne to ban the grandfathering of conflicted remuneration paid to financial advisers.

As part of the wider reforms, Senator Hume says the new laws will work to “break down the barriers to switching products”.

The Consumer Data Right mechanism will deliver greater access to financial data. “It will allow all Australians to have ­access to their own financial data,” she says. “If you want to switch home loans or credit cards, you will be able to ask your bank to provide you with all the data you need in a one-click package — you don’t have to go through all the complex paperwork required for an application. It’ll lay the ground for an ­active, competitive and inno­vative fintech ecosystem to ­deliver better outcomes for consumers.”

Senator Hume says, on average, Australians could save more than $200 a year by switching credit card providers and “over $1000 per year switching a home loan”.

“(The) new laws will introduce an ‘open banking’ regime … reduce complex application processes to a single click when switching financial services providers, empower consumers to use comparison tools for products like credit cards and mortgages … and foster a more competitive, ­future-looking fintech and fin­ancial services environment.

“You will also be able to ask your bank to provide relevant data to accredited financial technology companies … who will provide … accurate personalised information about what your best options are.”

The government says while comparison apps are available, they expose Australians to risk of “theft or hacking”. Senator Hume says using the apps could contravene “your bank’s terms of service, which means you are inadvertently voiding all legal protection your bank may provide you in case you are defrauded”.