When the Australian Competition and Consumer Commission (ACCC) announced it was delaying the rollout of Australia’s Open Banking regime by another six months, it marked the third time the legislation has been postponed.
Since then, serious questions have been asked as to why Australia is still not ready to go to market with an initiative that was first planned more than two years ago with some $50m of government spending set aside for its implementation.
The ACCC’s statement, made in December, suggested banks and tech firms are still battling with various security and privacy issues relating to the Consumer Data Right (CDR).
ACCC commissioner Sarah Court, said “robust privacy protection and information security” are core features of the CDR which means that establishing appropriate regulatory settings and IT infrastructure must not be “rushed”.
Under the new timeline, deposit and credit card mortgage data now won’t be available until July 2020, while mortgage and personal loan data won’t be shared until November 2020. This means Australia’s open banking regime is now well over a year behind the original timetable.
Matt Cockayne, chief commercial officer at platform provider Yapily, believes it’s likely some Australian banks are dragging their feet to inhibit or limit the ability of third parties from accessing customer’s financial data and disrupting the status quo.
Some believe that Australian banks, like their peers in other jurisdictions, are nervous about losing out to fintechs and challenger banks, especially when recent banking scandals in the country have compromised consumer confidence in the big banks. Cockayne says that a stronger level of enforcement is now required to force through Open Banking.
“The regulator should be looking at enforcement action against the banks for not giving this the focus it deserves,” he explains.
“A good example of this is in the way the FCA and OBIE in the UK are working together to deliver live, reliable APIs from the largest banks.”
Finding the cause
Steve Morgan, a former COO of mortgages and retail lending at ANZ bank – one of the ‘Big Four’ banks tasked with piloting open banking in Australia – believes the delay has been caused by two fundamental factors.
Morgan, now industry lead for financial services, EMEA, at software company Pegasystems, says: “Some banks will have genuine issues about being ready in time. This will be partly based on their systems’ set up.
“Second, there is a track record of some organisational resistance to prioritising activity that in the end, will present both opportunities but also threats to the large incumbent banks. I hope this is not a factor, but it has been in the past when I was working in Australia, for example, with comprehensive credit reporting and involvement of all banks in that process.”
Morgan says it’s unlikely the Australian regulator and government will tolerate further delays, however, unless banks can prove real customer risk and that they have tried as hard as possible to meet this delayed deadline.
That’s not to say lenders haven’t been putting in some work. According to the websites of the Big Four, which also includes Westpac, Commonwealth Bank and NAB, all four have some form of API technology ready in the wings.
However, as guinea pigs of the new regime, Australian banks face great unknowns when striving to provide customers with wider access to data.
“The problems include deciding on a strategy and approach,” Morgan explains. “Essentially, how will your organisation face the opportunities and threats this presents to its current business position.
“Once that is set then it’s a case of implementing changes to your product, pricing, technology, processes and alliance or third-party support set-up. Both are in many ways equally challenging.”
Of course, this latest postponement comes around the same time as FinTech Australia’s blistering submission to a Senate inquiry into the CDR.
The industry body, which represents over 300 fintechs, venture capitalists and accelerators, did not hold back in its criticism of how the CDR is currently being managed, describing the open banking accreditation process as both “cumbersome” and “laborious”.
At 120 pages long, the submission, dated December 2019, highlighted some of the major difficulties the sector is facing in its quest to successfully launch open banking in the country.
These include a lack of consumer awareness about open data, Australia’s “fragmented and complicated” payments ecosystem, and shortage of angel investing in fintechs.
According to the association, fintechs wishing to participate in open banking face costs of up to $100,000 to get accredited by the regulator to receive data – an amount many start-ups will struggle to find.
Simon Cureton, chief executive officer of fintech big hitter Funding Options, warns with the new July deadline looming, banks need to ensure the right operational and process changes have been made.
However, Cureton says this is easier said than done given the big banks do not share common IT platforms or infrastructure – a hindrance that is no doubt adding to the hold up.
“If this delay allows the banks to be better prepared and implement more robust technology solutions to support the reform, then it is in the interests of all parties.
“With that said, neither the Australian government nor the ACCC will want to fall too far behind other countries that have already launched open banking. Hence, I don’t believe the deadline will be perennially pushed back.”