At the recent AFR banking and wealth conference, held as a virtual event during these unprecedented times, ACCC chairman Rod Sims reasserted a commitment to keeping the July 1 deadline for the launch of the first iteration of the Consumer Data Right reforms targeting the banking sector.
Called Open Banking, this reform requires banks – starting with the big four – to make transactional data available to accredited third-party data recipients, essentially empowering consumers to control who can access their data and how they can use it.
A common theme of the ACCC chairman’s speech – as you would expect – was competition. He even evoked the ‘invisible hand’ made famous by Adam Smith’s Theory of Moral Sentiments way back in 1776, where competition is held to be essential to the survival of a market economy.
In order to drive competition, it is vital to stay the course. Indeed, the impact of Open Banking, and the wider Consumer Data Right has the potential to be one of the most significant reforms in recent history.
In fact, Rod Sims likened it to the ‘reform decade’ of the 1980s in the Hawke-Keating era.
So why is the Consumer Data Right so important? This reform is not just about competition. It is about trust, transparency, and ultimately equity.
These are all social outcomes and are just as important to today’s consumers as getting a good financial outcome. It is the quintessential Australian ideology of a ‘fair go’.
In its simplest form, Open Banking is about putting control squarely back in to the hands of the consumer and empowering them to use emerging FinTech tools to get better deals, gain deeper insights, and discover smarter ways to spend or save.
And why is the timing never better? The current pandemic and challenging economic landscape ahead will inevitably deliver a hard-learned upside by necessarily improving people’s financial literacy.
We have been forced to take stock of our financial positions and encouraged to fully understand the impact of various financial support options made available to us. For example, early withdrawal of superannuation and temporary pauses in mortgage repayments.
In both cases, there are longer-term financial realities that inform any short-term decisions we may take. The compound effect of either stimulus is significant.
Therefore, assuming we emerge from these trying times as more savvy consumers, then Open Banking – and the extensibility of the Consumer Data Right to telecommunications and other utilities – is the perfect vehicle to drive better financial and social outcomes for everyday Australians.
There has never been a greater need for consumer-focused innovation and increased transparency in the financial sector.
It is easy to contemplate that the biggest impact of Open Banking will be on the big four – the traditional custodians of our transactional data.
Especially when emerging FinTechs like Split Payments, and challenger banks including Xinja and Judo Bank, are creating platforms and products that are disrupting areas including payments and lending.
Yet despite this disruption, Westpac, NAB, CBA and ANZ are all making significant investments in open banking above and beyond the regulatory requirements.
The question is why? If Open Banking is designed to open the flood gates for alternative financial services, why would the incumbents so readily support the reform?
The optimist in me suggests that any reform aimed at a standardisation of delivery in a trusted framework such as Open Banking, creates a level playing field that will not only drive competition, but also innovation that will meet the expectations of our digital economy.
With a level playing field, it’s anyone’s to lose.
Split Payments are fully supportive of the planned reforms and continue to advocate for a simplified regulatory framework that encourages innovation and does not stifle it.
To that end, Split have made a submission to the Senate Select Committee on FinTech and RegTech and remain hopeful that the interests of the consumer remain the core focus.
In my view, the importance of the Consumer Data Right has often been underestimated. The ability to share data in a common structure will really unlock innovation in the FinTech sector.
Kristofer Rogers is the chief executive officer at real-time payments platform Split Payments
Do you know more? Contact James Riley via Email.