The David Coleman Bank parliamentary inquiry issued its report to the Treasurer. There is growing concern that innovation and competition is lacking in the Australian banking space dominated by an oligopoly of major retail banks. Tyro has always deplored the high access barriers. And indeed the report states that barriers to becoming a bank are too high: only one Australian entity has obtained a bank licence in the past decade and that is Tyro.
There is progress, but it is far to limited and slow. A recommendation of the Inquiry states: “The committee recommends that Deposit Product Providers be forced to provide open access to customer and small business data by July 2018. ASIC should be required to develop a binding framework to facilitate this sharing of data, making use of Application Programming Interfaces (APIs) and ensuring that appropriate privacy safe guards are in place.”
The European Union has mandate Open API Banking effective 1 January 2018. There is a revolution in the making with the European banks after much resistance now accepting the Open API world and investing heavily into resolving the technical, security, privacy, consent, liability challenges. In the remaining 13 months the incumbent banks and challenger banks will learn and advance. As banks step up into new information enabled business models, price/performance will improve exponentially and business growth will accelerate.
And what about Australia? All too little, all too late. We need to go fast far beyond the David Coleman parliamentary report, the Productivity Commission interim report and even the European Payment Services Directive. There is a leapfrog opportunity. If the Australian major retail banks could deliver a new framework to the benefit of the nation, we could win. They should deliver effective by 1 January 2018 these user cases:
- As a customer, I am able to instruct my bank to share the KYC status with another bank or regulated entity. If I am a Westpac customer but want to consider a loan from ANZ Bank or a market based lender, I want my KYC status shared, alleviating my efforts to start a KYC process with each financial service provider that I chose. A block-chain implementation allows me to stay in control of my data. Banks and fintechs have the choice to fully or partially rely on the shared KYC.
- As a customer, I am able to instruct my bank that holds my data on my behalf to share it with another bank or regulated entity of my choosing, so that I can compare offers and benefit from more choice.
- As a customer, I am able to instruct my bank to honour a payment instruction (credit/debit) from another bank or regulated entity that I authorised to do so. I can now benefit from a seamless user experience managing my transactions, deposits and loans across multiple financial service providers.
There is a great opportunity, if the major retail banks offered an open shared KYC infrastructure (Digital Identity) that they and new competitors could chose to rely on. Australia could close up to the revolution that is in the making in Europe.
Past experience suggests that such a collaborative effort needs a strong mandate from the government and the respective regulators. Banking and financial services are ripe for disruption. We know that the country that enables innovation and fosters competition will win.