Banking sector experiencing ‘triple whammy’ of change

In her address to the Thomson Reuters Australian Regulatory Summit, ABA CEO Anna Bligh referred to regulatory, technological and consumer-driven change as a “triple whammy” impacting the banks.

Ms Bligh pointed to “major regulatory change”, referring to the recent implementation of the Banking Executive Accountability Regime (BEAR), the new Comprehensive Credit Reporting (CCR) system and the new Banking Code of Practice endorsed by the ABA. 

The former Queensland Premier also noted “technological disruption”, which she claimed presents the banking sector with both “challenges and opportunities”.

Further, Ms Bligh noted the impact of “consumer-driven change”, claiming that “we are now living in a time of… ‘instachange’.”

She explained: “When a problem is identified, the community demands and expects [the] government will instantly be able to respond to the problem.

“The community increasingly expects instant response, instant policy, instant legislative change and instant compliance — and many different reforms coupled on top of one another before we understand their impact or implementation challenges.”

Ms Bligh added: “[The] world is living through the single biggest transfer of power from institutions to customers.

“It is changing the nature of politics, community expectations, the operation of businesses and the way governments are approaching regulation.”

The ABA CEO warned that “instachange” carries “significant risk”, noting that it has affected the sector’s ability to develop “careful” and “rigorous” policy.

“I don’t have any confidence we are going back to a slow, careful linear process of policy development. I think the world has comprehensively [changed].”

She therefore said she believes that the bankers, regulators and government would “have to change the way [they] think and the way [they] do things”.

Ms Bligh called on the banking sector to “seize the benefits of the digital economy” to reduce risk, adding that the “legal fraternity and regulators” need to work together to ensure there are no “unintended consequences from an environment where everything is happening at once”.

Data is the “new oil”

Ms Bligh also lauded the benefits of open data, claiming that “if delivered properly”, it can “deliver enormous empowerment to customers”.

Echoing a statement made by Salesforce’s director of strategy for technology, Jonathan Miranda, Ms Bligh said that data “puts people in a position of power, owning their own data in a world where data is going to be the new oil”.

Ms Bligh said: “Giving people that power puts them in the driving seat in a way they haven’t been before.”

The CEO continued that should the government fail to design and embed an appropriate regulatory environment, there could be “more problems than we can imagine”.

“Not only do people have very high expectations for security of their own data and that it will be protected and kept safe wherever possible. Community trust will be further eroded at a time when we should be working together to do everything we can to improve it if we don’t get that right,” the executive warned. 

Ms Bligh reiterated that she believes there should be “adequate time for implementation”, and she called for “very strong collaboration with the Data Standards Board”.

The ABA head called for “phased implementation” of the open data platform and suggested that the regime could first roll out credit cards followed by “other projects in subsequent stages”.

Moreover, Ms Bligh said that data holders “should be obliged to share all transaction data” in a way that “facilitates its transfer and use but does that [with] all of the appropriate and necessary consumer safeguards.” 

Ms Bligh also called for the reciprocal sharing of data between banks and third-party corporations, but she said that the banking sector requires liability assurances.

“[Banks want to have certainty that, firstly, there has been some accreditation of that third-party provider and a resolution on where the liability will lie if the banks transfer the data to another entity and that entity is found to have breached the customer’s data,” Ms Bligh said. 

“Where does the liability rest? And if it rests with the third party, which is where the banks say it should, banks should not be liable.” 

[Related: ABA warns of data security integrity for open banking]