Fintechs sceptical of open banking rollout
Another open banking delay was announced last week.
The large majority of fintechs (85%) agree that when open banking starts next year it will help grow and promote the industry. Despite this, a number of them are sceptics of its rollout. According to a submission for the peak industry body for the fintech industry, FinTech Australia, its members have a number of issues with the rollout of the Consumer Data Right (CDR) and its first iteration, open banking.
Open banking will allow consumers to direct banks to share their financial data with banks and other accredited participants. By doing this they will be able to more easily find new services, switch between providers and find better and cheaper products. CDR will then be rolled out to the energy sector with the telecommunications sector proposed to follow.
According to FinTech Australia's submission to the Senate Select Committee into financial and regulatory technology, which will be submitted the afternoon of Monday 23 December, fintechs are generally supportive of open banking but there is scepticism around the rollout of the program.
"In particular, FinTech Australia members have noted that it favours incumbents from the perspective of the cost to comply, the timing of the rollout and the fact that only very limited companies have been invited to test the system," the submission said.
"One FinTech Australia member noted that even during the consultation phase it felt like there was little opportunity to participate as even in the roundtables it seemed clear that they were only looking for submissions from the Big Four."
The open banking timeline experienced a delay just last week when it was announced consumers would not be able to participate in it until 1 July 2020, a full 12 months from when the initial deadline was set. This was the second delay that has been announced.
FinTech Australia said they were disappointed in the delay, but also said it was not surprising given members noted they felt it was unlikely the banks would have their data sets ready in time.
"As one member put it 'we can't afford another NPP type scenario. Banks and the industry need to be held to account to meet the timetables established'."
Now there is an increased timeline, FinTech Australia recommended that the number of fintechs allowed to test the system should be increased to facilitate the development of services to consumers. Currently, 10 fintechs have been chosen by the Australian Securities and Investments Commission (ACCC) to take part in testing.
It also recommended open banking and CDR be supported by an education program to inform consumers about what it is and "counter potential fear-mongering and negative messaging from incumbents".