Published on the 06/12/2017 | Written by Jonathan Cotton
New legislation will shift the control of users’ data from the bank to the customer (and may just supercharge the fintech sector)...
The Australian Government announced last week that it will legislate a national Consumer Data Right, allowing customers open access to their banking, energy, phone and internet transactions. Similar moves afoot in New Zealand – and already under way in Europe – has the sector preparing for a shake up from the fintech movement.
Assistant minister for cities and digital transformation Angus Taylor has labelled the move as “the biggest reform to consumer law in a generation”.
“Australians have been missing out because it’s too hard to switch [providers] to something better. You may be able to access your recent banking transactions, or compare this quarter’s energy bill to the last, but it sure isn’t quick or easy to work out if you can get a better deal elsewhere.”
“It won’t be far down the track when you can simply tap your smartphone to switch from one bank to another, to a cheaper internet plan, or between energy companies. Government is lifting the lid on competition in consumer services and technology is the enabler,” he said.
By “far down the track” he means July 2018, when the open banking regime will require Australian banks to open data access to customers and small businesses.
The move comes on the heels of recent strides in reforming data policies in the banking sector, with the intention of expanding the process to ultimately include other industries including energy, internet and telecommunications.
The Turnbull Government first made the announced in July, saying it would begin a review of open data policies in the interest of driving innovation in financial services and encouraging competition among banks, at the same time releasing the Review into Open Banking in Australia: Issues Paper.
“Greater consumer access to their own banking data and data on banking products will allow consumers to seek out products that better suit their circumstances, saving them money and allowing them to better achieve their financial goals,” said treasurer Scott Morrison at the time. “It will also create further opportunities for innovative business models to drive greater competition in banking and contribute to productivity growth.”
The move is in-line with global trends. Open banking is currently being mandated in the UK, with the EU’s early foray into open banking, known as PSD2, will introduce new rights of access for third party fintechs to access payment accounts data held by banks.
In New Zealand, where the banking sector is dominated by Australian banks alongside local Kiwibank, Commerce and Consumer Affairs Minister Kris Faafoi is also pushing for open data reform, setting an April deadline for the banking industry to demonstrate progress towards open data API capability, and leveraging Payments NZ – a governance organisation owned by local banks – to do it.
While the Federal Government’s announcement was met with some initial resistance, the big four banks have all now indicated they support the idea – with a few caveats – namely, the insufficiency of the current regulatory framework, technology neutrality, consumer consent (notably issues of scope and the problem of lengthy ‘legalese’ in consent documents) and who is, ultimately, liable for incidences of data loss.
Developers of all stripes are looking forward to the liberation of this customer data. David Simmonds, managing director of wholesale-focused ERP software vendor Jiwa, said the move represents a “levelling of the playing field for ERP developers”, as they’ll now be able to compete with companies like Xero and MYOB who, thanks to their large customer bases, have managed to strike lucrative deals with big banking players.
“Every ERP developer will be able to make their own connection to the bank, instead of having to approach the banks, cap in hand,” Simmonds told iStart.
“So I’m optimistic. It will be really great when it comes out. It will enable us to build connectors straight into bank accounts and do a ‘bank feed’ – a very nice thing to have in a piece of software. To get a bank feed now, we have to go via Xero. It would be far better for us to be able to go direct.”
One final issue of contention – who pays? Presumably incumbent banks will be looking to shift the day-to-day and development costs to other parties.
“These things do come at a price, but I’d like it to be commensurate with what it actually costs to do, rather than something treated as a profit centre,” was Simmonds view.