In submissions to the Senate Select Committee on Australia as a Technology and Financial Centre, the big four banks have discussed the practice of debanking – when a bank decides to stop providing services to customers.
The fintech Senate committee has focused on removing barriers to Australia’s growth as a technology and finance hub for the last phase of its inquiry, examining issues around industry competition and debanking.
Committee chair and Liberal senator Andrew Bragg previously flagged debanking as part of a “major concern for the fintech sector”, amid other allegations of anti-competitive conduct.
The senator also noted the practice could also threaten fintechs’ access to the New Payments Platform, the infrastructure allowing real-time payments across banks that was developed by 13 organisations, including the big four, the Reserve Bank, Bendigo Bank, HSBC, ING and Macquarie.
The banks have responded with a range of reasons for why they may dump customers, including risks related to financial crime, commercial considerations, fraud and other convictions; or businesses becoming deregistered.
Westpac in particular said it does not consider the fintech sector overall to be of higher risk around financial crime.
But a review of its past decisions revealed the bank had decided to exit an estimated total of eight fintech businesses in the year to May, with reasoning that they had operated in higher-risk areas or had higher-risk aspects.
The bank had also enhanced its Financial Crime Risk Management Framework, following proceedings launched against it by AUSTRAC.
“Before a decision is made to cease offering banking services to a business, we will undertake a process to gather information,” Les Vance, group executive for financial crime, compliance and conduct at Westpac, wrote in the submission.
“This typically involves a conversation with the customer to understand the nature of their businesses and the activities that have triggered the risk assessment. We will take this information into account in making any further decisions.”
The bank also stated it will generally give a 30-day notice period to customers, but the period can vary depending on the case.
NAB on the other hand stated that it might choose to debank a customer if the cost and resources to support them is greater than the commercial benefit.
“For example, the monitoring and oversight of a fintech’s underlying activity may be cost prohibitive, meaning that the risk of the fintech may be greater than any possible commercial benefit,” NAB chief executive Ross McEwan wrote.
The bank also stated it had “experienced instances of some fintechs using certain banking products for purposes which they are not intended”.
“A product may be designed and offered according to certain commercial, risk or regulatory parameters,” Mr McEwan stated in the submission.
“NAB may stop offering that product to a customer if it is not being used in line with its intended design or use.”
NAB declined to comment on details of customers it had debanked.
However, it asserted that it has supported both non-banks and fintechs, having acquired neobank 86 400 and invested in fintechs through its venture capital arm, NAB Ventures. The incubator had backed companies such as online home loan provider Athena and business payments platform Veem.
CBA echoed its fellow big four banks, pointing to anti-money laundering and counter-terrorism financing (AML/CTF) laws.
“In circumstances where a customer’s source of funds and source of wealth is unable to be determined, or their account activity is not in accordance with known business activities, the group takes appropriate steps to mitigate and manage its ML/TF risk,” Euan Robertson, CBA general manager for government, industry and sustainability wrote.
“This may include ceasing the business relationship with the customer.”
But the bank said it was “expressly prohibited” from telling affected customers why it decided to cease their business relationship, under the AML/CTF Act.
Similar to NAB, CBA referred to its own investments in fintechs, through its incubator x15ventures and partnerships with companies such as online shopping start-up Little Birdie and electricity provider Amber.
The committee had not published a submission from ANZ, as at Wednesday (14 June).
The inquiry is set to wrap up on 30 October.