The government will force the big banks to reveal customer credit information from next year in a move that Treasurer Scott Morrison says marks a “major milestone” for the Australian FinTech sector.
Mr Morrison said the federal government would implement a mandatory comprehensive credit reporting regime (CCR) for the major banks from 1 July next year.
The major banks will be required to share ‘positive’ credit data of customers, including credit limits and loan repayment history, allowing competing FinTechs to get a better understanding of risk profiles, and offer more accurate risk-based pricing.
“This is an important milestone in the development of FinTech in Australia. It’s a game-changer for customers and lenders, and will lead to greater competition in lending and, naturally, provide better access to finance for Australian households and small businesses,” Mr Morrison told the Collab/Collide conference in Melbourne on Thursday morning.
“It will not only grow business and our economy, but it will change daily life. It’s a life-changing kind of change.”
In this year’s federal budget, government said that if there was not a 40 per cent uptake in voluntary credit reporting by the end of the year, it would make the scheme mandatory. It is understood the current uptake figure is still at less than one per cent.
“They’re not going to hit that target, we all know that and we’ve know that for some time, Mr Morrison said. “Only a negligible volume of data has been reported in that public format. That is not going to cut it in an ecosystem if we expect to succeed.”
The scheme will apply first to the big four banks, which are required to have 50 per cent of credit data ready on 1 July next year, and 100 per cent of data available by the start of 2019.
The Treasurer said the government is considering whether to apply the scheme to other institutions and FinTechs, but he expects other credit providers to “quickly follow suit” in order to remain competitive.
“The challenge here is being the first mover, and that has a negative incentive, so we’re going with a one and all approach. The major banks are very supportive of that and are working closely with us,” Mr Morrison said.
The CCR scheme was developed in consultation with the major banks and FinTech Australia. MoneyPlace CEO and FinTech Australia vice chair Stuart Stoyan said the move would level the playing field for Australian FinTechs.
“Until now, a number of Australia’s big banks and lenders have not been sharing the positive data which should allow customers to get better credit,” Mr Stoyan said.
“Today’s announcement will help consumers get lower interest rates and better access to credit. This will especially help borrowers with a good credit history who make their repayments on time, rewarding their good behaviour with fairer rates.
FinTech Australia wants government to extend the CCR scheme to include gas, electricity and phone service providers.
Mr Morrison said the government is considering this.
On the operational side, Mr Morrison said the industry would be responsible for designing and administrating the framework for the data sharing, while government would set the minimum standards and inputs.
He said such a mandatory scheme is already “commonplace” in the UK and US, and “sits in perfect partnership” with Australia’s upcoming open banking regime.
“Open banking creates opportunities for innovative business models to edge their way into the market, and customers take their destiny into their own hands,” Mr Morrison said.
Stronger customers is a stronger market, and more informed customers will put pressure on the financial market to become more competitive.”
Concerns have been raised over the privacy implications of a CCR scheme, and whether it will be unfairly impact those going through financial hardship.
Mr Morrison said provisions will be built into Australian privacy law, and the Office of the Australian Information Commissioner will “continue to protect and preserve the privacy of Australian credit customers”.
“Ensuring the security and privacy of Australians’ credit information will remain a key priority of the government,” he said.