Australia's big banks have been ordered to help fintechs get their foot in the door

Gary Friedman/Los Angeles Times via Getty Images

Australia’s four major banks have agreed, with some concerns over security, to allow open access to customer data.

A parliamentary inquiry has recommended that the banks be forced to give access to customer data to help fintechs now pushing against the market share of the banks.

The CEOs of the big four banks were questioned this week for a second time in the House of Representatives Economics Standing Committee hearings in Canberra.

In general, the CEOs have come to the realisation that disruption by fintechs is inevitable and many of them have invested in the sector.

However, the issue they worry about is data breaches and possible large scale identity theft. One banks says it comes under cyber attack on average every four minutes.

The parliamentary committee has recommended that the law be changed to have penalties against the banks if they don’t open their data vaults by July 2018.

However, the banks think the timeline might be a little optimistic, given the security issues. They want to see a phased implementation.

Westpac is generally in favour of opening the data doors.

“Westpac strongly supports the development of an enhanced data-sharing regime in Australia,” CEO Brian Hartzer told the parliamentary committee.

“Data, when used effectively, provides immense value to consumers, business and the government and will ultimately help ensure Australia’s global competitiveness through an innovative and productive economy.”

Westpac, along with the NAB and Qantas, has invested in Data Republic, an Australian start-up with a platform where data can be exchanged in a secure environment.

Stolen identities

However, the security issue is a big one.

“Recent data breaches globally have continued to impact Australian consumer confidence in data sharing,” says Hartzer.

“While a customer can be compensated for fraud losses, a customer cannot be compensated for the harm or anxiety of a stolen identity.”

Shayne Elliott, CEO of the ANZ, says consumers across all sectors of the economy including banks should have greater access to their data.

“This could help them choose products and services that best suit their needs, and help competition and innovation,” he says in response to the committee’s proposal.

The ANZ Bank says its wants to take advantage of greater data access.

“Secure and well-designed data access arrangements for customers are already, and will continue to be, a source of competitive differentiation,” says CEO Shayne Elliott.

“Currently, we make substantial amounts of data available to our customers including through arrangements with accounting software providers for direct data feeds and data downloads through our internet banking portal.

“Opening up sensitive data like customer transaction details, however, raises a number of issues that need to be considered and resolved.”

Hackers probe the bank every four minutes

The ANZ says it detects an aggressive probe on its network every four minutes.

“Identity theft is the main cause of cyber loss for consumers,” Elliott says.

“If Australia doesn’t get this right, we could see large scale data breaches and a loss of confidence in financial services.”

He says work needs to be done on security standards, liability issues, which data will be made available and the costs.

And then there’s the tricky question of economics.

Data is valuable

If feeds are provided free to third party companies, Elliott asks: How will the banks retain the incentive to invest and compete?

Ian Narev, the Commonwealth’s CEO, says the bank already has data sharing arrangements with Xero, MYOB and Airtasker.

“Open data presents opportunities to improve service quality and competition for customers, provided the security and privacy of customer data and finances are maintained,” he says.

“We are committed to using data to make it easier to switch banks, as well as to give customers greater visibility over quality of service metrics, including at a granular level.”

The NAB agrees to the sharing of data as long as the right security is in place.

The bank already has partnerships with Xero, MYOB, Demyst Data in the US and Medipass Solutions in Melbourne.

“NAB urges caution against the adoption of mandatory data sharing requirements due to the potential impact on existing industry work and innovation, the likely cost incurred and the importance of ensuring security,” the bank says.

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