As the Australian Government pushes towards a regulatory framework and operating model for open banking in Australia, based on the recommendations in the Farrell Review, the fintech industry watches on bemused by yet another wasted opportunity for real reform. By handing control of the design of Australia’s open banking initiative to the banks, the Australian government is dooming it to failure.
The very concept of “open banking” is abhorrent to the established banks. Think about it: the banks currently own the treasure trove of customer data that the government wants them to share with the fintechs, so they aren’t going to give it up without a fight. The banks will make sure that fintechs will have to jump through hoops to gain access to “their” data.
Back in August, the then Australian Treasurer Scott Morrison called on the fintech industry to not “stuff it up”, shortly before he became prime minister. Mr Morrison said he was relying on fintechs to use his open banking policies to increase pressure on the incumbents. And yet he entrusts the banking industry with deciding who gets to access the data and how the data will be shared.
It’s reminiscent of the National Payments Platform, Australia’s attempt at real-time payments. Another once-in-a-generation opportunity for reform in the Australian payments industry that promised so much and delivered so little. And you guessed it: it was designed by a consortium of banks, designed carefully to meet the brief given to them by the RBA and the Australian Government while preserving their privileged positions in the market.
The banks want open banking to fail in Australia, just as they did in the UK (https://www.afr.com/technology/australia-should-beat-not-copy-flawed-uk-open-banking-20181018-h16tj8). Adopting the UK open banking model would simply cement in their mistakes. And no amount of badgering by the prime minister will change that outcome.
Regardless of how strong the foundations laid out in the Farrell Review report are or how strong the regulatory framework put in place by the government is, the potential to white-ant the reform in the technical design and implementation phases is both large and likely. After the banking royal commission, this really can’t come as a surprise to anyone except the Australian Government.
If the Australian Government is so keen not to “stuff up” open banking, don’t give it to banks. If the government truly wants to make open banking a success, they need to task a suitably experienced and independent organisation with its design and implementation.