Australian Treasurer Scott Morrison has released Treasury’s report on the open banking review, which assessed the best way for financial institutions to share data with other entities in the banking system to enable consumers to better compare products and services.
The report, commissioned by Treasury and conducted by King & Wood Mallesons partner Scott Farrell, made 50 recommendations on the best regulatory framework, what and how data should be shared and transferred and to who, and how open banking should be implemented.
Some recommendations included a “layered regulatory approach” involving different regulators; the establishment of a ‘Data Standards Body’; that banks make information on products and services such as price, fees and other charges publicly available where obligations to do so existed.
The report also recommended that data sharing required “explicit, fully informed” consent of the customer; that the four major banks to be the first to comply with open banking data sharing; and that the ACCC should develop and implement a “timely consumer education program” about open banking.
“Granting third-party access to a customer’s data will allow rival providers to offer competitive deals, products that are tailored to individual needs, and enhanced services that simplify the choices customers face when accessing banking services,” Mr Morrison said in a statement.
“It should simplify the process of switching between banks and help to overcome the ‘hassle factor’ that sees customers stay with their current bank even in the presence of more competitive deals elsewhere.”
The report said the open banking framework must adhere to four “guiding principles”: it must be “customer-focused”, “promote competition”, “encourage innovation”, and be “efficient and fair”.
Mr Morrison said open banking would help increase competition in the sector, leading to “cheaper and better-tailed products for customers”.
“The ability to instruct that their data be shared with competing banks could also usher in a new era of competition in banking for small business customers,” he said.
Mr Farrell said in the foreword said that while the report focused on how open banking should be implemented, it was “worth sparing a moment to consider what open banking could mean in the future”.
“Improving the control, choice, convenience and confidence of customers should, in the longer term, create a customer-centric data sector which generates growth and employment and, importantly, value to customers by increasing the safe and efficient access to data,” he said.
“The new services, new products and new skills inspired by open banking which benefit customers are likely to be in demand not only in Australia but also overseas.”
Industry welcomes report of the review into open banking
Fintech industry body FinTech Australia chair Stuart Stoyan said in a statement that the body had been advocating “continuously” for an open banking framework.
“Importantly, we have also advocated that this model also include an accreditation framework for data receivers to ensure consumer confidence in the security of their personal data. We are pleased to see the government has backed this idea.
“It is also vital to supporting greater fintech innovation – which creates increased competition, greater choice, more efficient delivery and lower price of financial services for consumers,” he added.
Neobank Xinja chief executive Eric Wilson said he “applauded” the Treasurer for moving Australia towards an open banking system.
“It's time Australians had access to this kind of technology,” Mr Wilson said.
“We believe that open banking is just one of a number of changes (including the banking royal commission) which are ushering in a new era of banking defined by greater transparency and the use of exciting new technology leading to a better banking experience for all Australians.
"It will benefit consumers who will have access to better, more tailored products and services as well as start-ups (like Xinja) who can create innovative new solutions.”
