The much-anticipated launch of open banking in Australia has been quietly delayed by the federal government by eight months.
On the last Friday before Christmas, a day typically used to “take out the trash” and make some unfavorable or unpopular announcements, Treasurer Josh Frydenberg put out a statement late in the afternoon revealing that the open banking regime would not kick off in July as previously announced.
Instead, a “pilot program” would be conducted by the Big Four banks in partnership with the ACCC and Data61 to “test the performance, reliability and security of the open banking system”.
The delay is likely to infuriate the local FinTech sector and consumers in general, after the government had regularly proclaimed last year the “game-changing” nature of opening access to financial data and allowing it to be passed to smaller FinTech players and other banks.
Government had also previously lauded by the FinTech sector for resisting the calls from the Big Four banks for the scheme to be delayed, but it seems now to have eventually relented.
From July this year, the major banks in Australia will take part in the pilot, where they will share product data about credit and debit cards, deposit accounts and transaction accounts, with consumers and FinTechs also invited to take part in the tests.
Eight months later in February 2020, product and consumer data for mortgage accounts will also be made available in the tests, with the proper open banking scheme becoming open to the public “no later than 1 February” next year.
“Once the ACCC is comfortable with the robustness of the system, banks will publicly share consumer data about credit and debit cards, deposit accounts and transaction accounts, which will be no later than 1 February,” Mr Frydenberg said.
The competition watchdog will begin working with companies looking to gain accreditation to allow them to accept customer data from July this year.
SocietyOne chief executive Mark Jones said the delay is “disappointing”, but ensuring there is trust in the scheme is paramount.
“Given the plethora of benefits open banking will deliver to everyday Australians needing credit, it is a little disappointing to see the process being delayed,” Mr Jones told InnovationAus.com.
“However, it is important that open banking is trusted by customers, so we do support a phased implementation so that customers can be sure of the protections over their data,” he said.
“We are confident the government is acting in the best interests of Australians in taking a careful approach to its roll out.”
MoneyPlace chief executive Stuart Stoyan said the delay was “disappointing but understandable”.
“It is important that we get open banking right and have a robust and secure regime for Australia, so a delay of eight months is disappointing but ultimately understandable,” Mr Stoan said.
“However, this is a fundamental opportunity to transform Australian financial services, and address a number of issues arising from the Royal Commission,” Mr Stoyan said.
“The full potential of open banking is better customer outcomes, which is why we absolutely need to hit February 2020 as any further delay will only be at the expense of the customer.”
The path to open banking in Australia kicked off in July 2017 when then-Treasurer Scott Morrison commissioned a review into the scheme.
It was confirmed in last year’s budget that the government would be moving forward with open banking through the legislation of the Consumer Data Right, which will also be later applied to the energy and telecommunications sectors.
The federal government initially announced a phased implementation of open banking, launching in July this year with the big four banks, but this has now been pushed back by eight months.
A 15-member advisory panel for the scheme was named in July, featuring six members from banks, three FinTech firms and one representative each from the telco and energy sectors.
Open banking is widely seen as a massive opportunity for Australian FinTechs, which will soon be able to access valuable customer data and compete on a more level playing field with the bigger banks.
But SocietyOne’s Mr Jones told InnovationAus.com last year that the scheme could also pose a threat to FinTechs.
“I think open banking is going to mean that it’s really important we remain trusted, and that people still have confidence in us,” he said.
“As a FinTech industry we need to make sure that we use customer information appropriately for the right purpose, at the right time, and that we don’t abuse their trust. If you lose that trust then you won’t get the information,” he said.