The standing committee on economics has echoed the sentiments of fintech executives who emphasise that open data would be a positive step for the banking industry and critical for fostering competition.
At the bank inquiry on Tuesday, the standing committee on economics chairman David Coleman said that an open data regime would be a “very positive thing for competition” within the industry.
“One of the committee’s recommendations is that, subject to appropriate privacy and other safeguards, customers be allowed at their own choice, to provide data about their transactions and banking history to other banks, start-ups and financial services providers,” he said.
“It will mean that consumers will be able to say, ‘well here's my transaction history, who's going to offer me the best deal on a product?’ It means lower interest rates in the long run, and is good for consumers.”
Mr Coleman’s comments come after David Grafton, the former managing director of credit services and decision analytics at Experian, emphasised at last week’s AltFi Australasian Summit that banks stand to “benefit massively” from such a regime.
He explained: “For a bank to be able to use comprehensive credit reporting information, it makes significantly better credit decisions, which dramatically reduces bad debts, and also enables them to open up new markets for credit where currently they haven't got enough information to say yes to someone who is applying to them.
“So, there are very significant dollar benefits to banks that arise from an increased size of the market and also, depending on where the bank's risk appetite is, a reduction in bad debts.”
“There is no doubt at all that when you look at the financial benefits the banks get by taking part in comprehensive credit reporting, it is massively positive. So, it’s good for banks, it happens to be good for consumers because you're making more responsible lending decisions, and it’s also good for the economy because it widens the credit market.”
CrowdFundUp founder and Fintech Australia director Jack Quigley agreed that open data is critical for promoting competition within the industry.
“Whether it's a tech start up or a bank, a vibrant competitive landscape is great for a financial services industry,” he said.
Potential risks need to be ‘thought through’
In response to Mr Coleman’s comments at the bank inquiry, CBA CEO Ian Narev acknowledged that the introduction of an open data regime is inevitable for the industry. “The bottom line is, this is going to happen, and we accept that, and we think competition is good for us,” he said.
However, he emphasised that while CBA is happy to make it happen, he is primarily concerned with the safety of the bank’s customers.
“What I don't want to do is be sitting here at one of these committee meetings in a number of years with us all talking about why a policy we implemented resulted in significant security and privacy breaches.”
He added that he would be open to the solution of an independent body taking charge of the process, as long as it’s “very clear” who is specifically accountable for any privacy concerns that may arise.
Similarly, during his keynote talk at the AltFi Australasian Summit, ANZ CEO Shayne Elliott emphasised that while he doesn’t have a problem with open data, and can see how it could be a good thing, ultimately banks are the custodians of customers’ data.
“We have a responsibility to look after it and protect it, and if customers want to move it somewhere, we have responsibility to do that. There's lots of opportunity in us doing that, but we do need to think about security and the way that it's undertaken.
“It does open up new risks, and I'm not suggesting that that should mean that we don't get into open data regimes, but it means we should be really thoughtful about it.
“I know people will criticise the banks and say that we're trying to slow it down, I don't think that's the motivation, I think it literally is looking after our customers. If we open up data too quickly, there is real risk here and this needs to be thought through.”
[Related: Opportunities abound with open data]