By 2018, banks in the United Kingdom will be required to effectively open up APIs to enable consumer data to be accessed by competing banks, startups, and other financial institutions — providing the consumer consents.
Throughout the inaugural House of Representatives Standing Committee on Economics’ three-day review of Australia’s four major banks, committee chair, Federal Member for Banks David Coleman, raised the question of account portability to each of the bank’s representatives, citing the UK regulator’s recent move to make this a banking requirement.
Eager to see the practice underway in Australia, Coleman asked the Commonwealth Bank of Australia (CBA), ANZ Bank, the National Australia Bank (NAB), and Westpac that if the Australian Securities and Investments Commission (ASIC) had such a mandate to require the opening of data and the opening up of information so as to enable consumers to ditch their bank, whether they would stand in the way or support the move.
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On day two, ANZ CEO Shayne Elliott said his bank would be happy to cooperate with ASIC if it were to mandate such action.
“In the past the technology has not always existed to make that easy. We are, quite rightly, the custodian of our customers’ money and a lot of their data, and over time what we are finding is that data is of incredible value to our consumers,” Elliott said.
“But we are the custodian of that and we have a responsibility to keep both the money and the data safe and secure. It is our customers’ data and, if they choose to make that available to other parties, whether it is other banks, fintech [startups], or whoever, absolutely we should enable that.”
Elliott said he believes it is ANZ’s responsibility to ensure such data is stored, secured, and potentially handed over in a safe and secure way.
“I think we all know somebody who has been the victim of fraud, phishing attacks, or any kind of data-integrity issues and we just need to make sure that our customers are protected in the process,” he added. “But that is not an argument for resisting it.”
Coleman is of the belief that the availability of account portability is going to help consumers as they move between banks, as they will be able to carry over their transaction history.
“Whenever this issue has arisen in the past, the attitude of the banking sector has generally been to say it is all too hard, there are technology problems, there are privacy issues, and we should not do it,” Coleman said. “Technology has obviously moved on, and it seems to me that this is something that should be assessed again.”
On the final day of the hearing, Coleman first posed the question to NAB, with CEO Andrew Thorburn commenting that overall, his bank welcomed the competition.
“That is how this bank has survived and competed for 150 years. And now we have new competition — fintechs that are coming at us — and we welcome that, too,” he told the committee.
“We have to lift and get better, and that is good for customers.”
Of particular concern to NAB COO Antony Cahill is the security around opening up such information to the market, noting that the bank’s key priority is ensuring that the correct protocols and security regimes are in place to avoid a breach.
“In relation to opening up our data more broadly, and in actual fact sharing customers’ data with other institutions, we agree with that in principle. From our perspective, trust is the key thing that we have with our customers. If we were to lose that trust in a data breach or a privacy breach, then we would take that very seriously,” he added.
“In relation to data sharing, the top principle is absolutely that we welcome competition. In terms of data sharing, if that can generate better outcomes for customers, we would support that in principle.”
The last bank to face the committee was Westpac, whose CEO Brian Hartzer, as if reading from the same script as Thorburn, said he was supportive of more competition and that the availability of account portability would be healthy for customers and the industry as well.
“We are clear that changes in technology are very substantial in our industry. It is having a massive effect; it is changing the way customers deal with us and it is changing the way we run our business,” Hartzer said.
“We believe that it is appropriate that more access to data is made available to enhance competition.
“We are very supportive, but do not underplay how important it is to put that control around.”
CBA, however, initially commented that is opposed to the practice, citing data security concerns and the misfortune of previous technology projects as its main rationale.
CBA was the first bank to face the committee, which resulted in the other three perhaps being more prepared to answer the question. As a result, CBA appeared to oppose the move but CEO Ian Narev did say that he accepts the broad proposition of making the practice work in the spirit of competition and consumer control. His argument against was not too dissimilar to the other CEOs, telling the committee CBA would need to first make sure that the discussions and detail about how such services are delivered do actually achieve that goal before changing its stance on the matter.
In their respective responses, all four CEOs highlighted the complexity of implementing account portability and also focused heavily on the privacy of customer data.
Westpac’s Hartzer, for example, did offer the committee expansive detail on how complex allowing account portability would be, with his first point being the different account number length each bank has. Secondly, he said that as some accounts are loan accounts or other accounts that require a credit approval, shifting those over to another bank would prove complicated.
He also said the BSB framework embedded through account systems would need to be changed.
“It might sound like an easy solution; it is a lot harder than you think,” he told the committee. “We do not object to the issue.”
For the 2016 financial year, CBA reported statutory net profit after tax of AU$9.2 billion.
NAB will release its FY16 results in November; however, the bank reported cash earnings AU$3.31 billion and underlying profit of AU$5.1 billion for the first half of its financial year.
Similarly, Westpac posted statutory net profit of $3.7 billion for the half year ended March 31, 2016 and ANZ reported a statutory profit after tax for the same six-month period of AU$2.7 billion, on cash profit of AU$2.8 billion.
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