Several years ago, I sat on a panel with a senior leader at the UK’s Competition and Markets Authority. The CMA was just about to launch the first iteration of its open banking package to increase competition in the retail space. In 2017, the CMA ordered the nine largest retail banking providers in the UK to open up customer data using secure data protocols.
Based on my experience, I argued whether the success of this directive would be hampered by the challenge of persuading the banks that opening up access to their customer data in any meaningful and useful way would be beneficial. Complying with any regulation is taken seriously by banks but is rarely done with immense enthusiasm. The CMA open banking directive, in particular, is aimed directly at addressing the market share dominance of the top banks.
The senior leader replied — earning chuckles from the audience — that the CMA had “very good lawyers”. (Meaning that enthusiasm to comply would be mandated.)
I thought back to that exchange after researching the reaction to the recent strategic review into the roll-out of the Consumer Data Right regime put out by the Australian Banking Association and administered by Accenture. The CDR enables open banking in Australia and the review claims that in the four years since it launched it “has not realised its potential”.
As you can guess, many in the Australian fintech and open banking community are not happy, especially as the review was released one month before the Australian government votes to allow “action initiation”, a measure that will enable bank account switching by consumers.
Jill Berry, chief executive at Australian fintech company Adatree, claims “there’s been a lot of behind-the-scenes lobbying to influence senators on passing (or not)” the “action initiation” portion of the regime. While Rehan D’Almeida, chief executive of FinTech Australia, says that “History has shown that the ‘build it and they will come’ mentality with fintech won’t work. This is why we call on our banking partners to work with us on raising awareness of this tool, for the sake of addressing cost-of-living pressures”.
My mother used to say “you catch more flies with honey”
However, it makes sense that fintech companies would want to promote open banking. Various open banking initiatives around the world have been either market-led or mandate-led but seek similar goals — to increase the amount of choice for consumers by giving them greater control over how and where they use data related to their financial life.
The benefits of open banking for consumers, as well as for the emergent fintech community have been repeated frequently in speeches, news articles and blog posts. However, I rarely see the benefits for the incumbent banks spelled out.
How do you convince any business, never mind a bank, to promote and enable an action that is meant to cut into their market share and enable customers to switch their business?
The top four banks in Australia — Commonwealth Bank, Westpac, Australia and New Zealand Banking Group, and National Australia Bank — may very well be lobbying behind the scenes to influence the latest vote on the CDR. This latest review by the ABA may also be another way to influence that vote. But honestly, would that be a surprise?
A lot of the coverage around Australia’s CDR does present it as a “threat” to the top four banks’ dominance in the country. Who is making the argument for the benefits, not just for the market, not just for financial inclusion and increased competition, but for the banks themselves?
My mother used to say “you catch more flies with honey”. Australia votes on whether to allow bank account switching in about a month. That backdoor dealing better lay out some sweet treats to convince the banks that voting “yes” on that measure would be a good idea.
