If banks were required to open their customer data to competitors, economic growth would be bolstered through financial services competition and customer service would be improved by allowing fintech companies to create better-priced financial products, argues Fintech Australia, an industry group representing financial technology start-ups. The Productivity Commission’s review into ‘Data availability and use’ is looking at whether a system of “open APIs” [application programming interfaces] could be created along the lines of a new regime in Britain to allow competitors to plug directly into data sets held by banks, such as transaction account activity. Fintech Australia has asked the commission to recommend an “open banking API” regime be mandated within two years. But the calls are being resisted by the nation’s banks, which say a compulsory open-data regime would be costly to implement and could raise security concerns. The banks say data policy is best determined by the market.
“The evolution underway in data sharing suggests that government intervention to mandate the release of private data, or to interfere in commercial transactions that underpin the emergence of market solutions, may be unnecessary,” the ABA said. But Fintech Australia, on behalf of 25 start-ups, data aggregators and venture capital investors, says an “open banking API” standard would increase productivity, reduce the cost, time and effort required to switch banks, and would “empower consumers to use their data to be able to make better financial decisions”. Separate submissions by the ABA, Commonwealth Bank of Australia, ANZ Banking Group, Insurance Australia Group and the Australian Securities Exchange all urge the government to not regulate to mandate open-data sharing. The ABA said building an open banking standard was “likely to be a very costly exercise for banks” and would provide competitors with access to a valuable commercial asset. “The banking industry notes that business and customer relationship data are a valuable commercial asset and are subject to extensive investment, privacy and other obligations,” the ABA said. “Changes should not be made that may affect the ability of businesses to manage their data in the interests of customers and owners.”
In an interview last week, ANZ Banking Group’s new head of digital banking Maile Carnegie said that, when considering data-sharing with fintechs, banks would need to be cautious about customer permission, privacy and data security, and might not be willing to give up the data that provided banks with their competitive advantage. ANZ said in its submission that it had two main issues with the proposal to mandate open APIs. “The first key issue is that it is possible that mandated availability of data could undermine individual privacy and dignity through impaired data security … [the] second key concern is that mandated availability could undermine the legitimate interest which data custodians have in the investment they have made in establishing and maintaining data sets.” CBA made similar arguments, saying it had committed material and grown sustained funding to secure and maintain its data assets, reflecting the “systemic importance of data to building and maintaining trust in the financial services sector”. But “without the ongoing policy settings to encourage this investment Australia will be at risk of falling behind in financial services innovation to global peers,” CBA said.