King & Wood Mallesons partner Scott Farrell talks about the “exciting challenge” of leading the government’s inquiry into open banking and how the framework will drive the country towards a new economy
Farrell was appointed in July last year by the then Treasurer Scott Morrison to lead the government’s open banking regime.
The review was quickly described as the Farrell Inquiry a nod to Farrell’s 20 year plus experience in financial -markets and “intimate knowledge of the financial technology sector” as acknowledged by Morrison.
"Personally, I have been quite humbled by how many people have been willing to help. It has been a privilege to lead such a review - It was both an exciting challenge and a lot of hard work,” Farrell said.
In May, the Government announced that it would implement all the recommendations in the final report. Industry participants AB+F spoke with were consistent in their views, saying that this decision was testament to the meticulous approach adopted by Farrell in working with all the stakeholders.
Indeed, the development of the framework, was a culmination of more than one hundred meetings with banks, fintechs, regulators and consumer groups.
“They were very real conversations. Many times we had to go back again and again and again to discuss issues with the stakeholders to work out effectively what they really needed to make this work.”
Such an approach was key. According to Farrell, a lot of the input was constructive which not only helped shape the recommendations but importantly allowed each of the stakeholders to have a sense of ownership.
The reasons for moving to open banking were based on four principles. It had to be desgiend with an “intense focus on the customer”; it had to encourage competition and it had to be fair and efficient. Another principle which differentiated the regime was that there had to be a clear policy reason in encouraging the development of a creative and innovative data sector in Australia.
“In other words, to make this work for the customer, they needed to have not only choice but convenience as well as confidence in the framework.”
Indeed, when commenting on the final review, Morrison told media that an open data regime will position banking as a “trailblazer for other sectors” adding that he planned to extend the framework to energy and telecommunications by implementing open banking within the Consumer Data Right in Australia.
This is a more general right to data which will be expanded across the economy. It was a recommendation by the Productivity Commission’s Data Availability and Use Inquiry.
Bigger than open banking
For Farrell, the involvement of other sectors will make the framework “bigger than open banking” and further highlights that Australia’s open banking system is much more than the UK framework with “a little bit added for Australia”.
The key distinction here is that the Australian framework extends beyond banking, effectively paving the way for the country to forge ahead and create a new data economy.
Much of the focus has also been on the opportunity for banks to provide new and innovative services to customers in an open data world but this differentiating factor will mean other sectors, not just banking will be able to deliver new and innovative consumer offerings, underpinned by the power of data.
According to Farrell, the Australian consumers and businesses will not just be engaging in open banking but in a new data sector.
Indeed, the framework was not designed so that each industry operates as “separate silos”. Under this regime, he sees the potential for businesses to offer products and services that “surprise and delight.”
Here he sees the various industries using the framework as a “stepping stone to becoming a participant in other sectors”.
For example, consumers will be able to ask their energy provider to provide their information to a bank, the bank can then provide the consumer with insights on their energy bill. “This cross-sector approach will not only benefit the consumer, but businesses can also develop into new areas to compete in”.
Despite a deadline of July 2019, industries including, and beyond banking need to be thinking about how to understand and engage with this fundamental development, as a customer and /or a service provider.
“A new playing field for customers and businesses has been set. This is not science fiction. We are building the rails now and now is the time to engage.”
At a practical level Farrell continues to say that this means understanding the Consumer Data Right – which is to become law. Banks, followed by energy companies and telecommunications companies in Australia will need to respond to the new rights being given to their customers - and the customers of their competitors as the Consumer Data Right commences.
“Engaging in the consumer data right will create opportunities for businesses to truly immerse themselves in Australia’s ‘new’ data sector and data economy.”
This is an edited version of AB+F’s profile on Scott Farrell. The full interview is included in the October edition of the magazine.