Fintechs embrace open banking reforms

  • By Christine St Anne

Fintechs have supported the Federal Government’s decision to introduce an open banking regime but some warn that there is a risk of 'sandbagging' the proposed reforms by the big banks. 

The decision, announced during Tuesday night’s budget, was based on recommendations from the Productivity Commission’s final report into data availability and use.

The Department of the Treasury will lead an independent review to recommend the best approach to open banking and will report its findings by the end of the year. The government will also consider ways to boost comprehensive credit reporting (CCR).

The government’s decision is aimed at promoting competition in banking. 

“The Government will introduce an open banking regime that will increase access to banking product and consumer data by consumers and third parties, if the consumer consents,” Federal Treasurer Scott Morrison said.

“This will empower consumers to seek out banking products better suited to their needs and create further opportunities for innovative business models in banking that enhance competition.”

Driving competition

These measures are consistent with other global initiatives. The United Kingdom and European Union have already moved to adopt an open banking regime while both the UK and United States have a workable CCR system in place. 

RateSetter chief executive Daniel Foggo said the government’s decision proves that it can “stand up to the banking sector lobbyists” and that fintechs could play an important role in driving competition and making it easier for consumers to find alternative savings and credit products. 

“In simple terms, this measure will help break down the huge advantage big banks have over innovative new entrants and make it significantly easier and faster for consumers and small businesses to switch to providers like RateSetter who can offer a much better deal,” he said.

“Open data has real potential to drive competition, spur on the development of Australia’s fintech sector and ultimately save consumers and small businesses a significant amount of money.”

Similarly, Stone and Chalk chief executive Alex Scandurra said the measures would pave the way for a greater role for fintechs. 

“Open data, if done properly, has the potential to unleash innovation and economic activity at an unprecedented scale,” Scandurra told AB+F

“By having access to these data sources, startups will be able to create solutions in niche and specialised customer segments which government and corporates could never affordably serve.” 

Stone and Chalk are already piloting a new data program to explore emerging areas of business for fintech’s existing players and startups.

Comprehensive Credit Reporting

According to SocietyOne chief executive Jason Yetton, the regime will allow customers to request that their data to be shared with competitors and empower them to seek better deals. 

“This gives more power to consumers and will stimulate competition in the financial services sector,” Yetton said. He particularly supports the government’s backing of a CCR regime.  

“CCR has been available to consumers in the UK for over 10 years and it now only takes three to six months for consumers in the UK to improve their score. We’d like to see a similar system implemented in Australia to help lenders engage in more accurate, responsible lending.” 

However, the government did not go far enough with the open banking initiatives, according to zipMoney chief strategy officer Tommy Mermelshtayn. 

“Commissioning a report, while promising, does not put the wheels in motion. Both the Productivity Commission and the Four Major Banks Parliamentary Report, have made the needs and benefits clear,” Mermelshtayn said. 

“There is a race on between Australia and the rest of the world and we would have preferred the government take a firmer stance on when these technologies need to be made available, and commission a report specifically focused on the ideal governance structure and that would work through key points of contention such as liability around the data,” he said. 

“We run the risk of an inconclusive report, sandbagging by big banks and even a change of government which could derail this critical advancement.”