Why Australia’s open banking should look towards UK and Europe for success
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Special Report: Seed Space Venture Capital managing partner Dirk Steller believes it’s absolutely critical that Australia learns from our international counterparts in making open banking a success, particularly as the Consumer Data Right is rolled out to different industries beyond financial services.
The Morrison government’s move to review the regulatory architecture of the Australian payments system last month as part of its national Digital Business Package spoke volumes of a marked shift at a federal level towards embracing the power of a modernised payments architecture to promote innovation and competition, particularly as Australia proceeds forward with open banking.
That is the view of Seed Space Venture Capital managing partner and founder Dirk Steller.
According to Steller, what needs to be considered as a first priority is how Australia can leap towards a more robust implementation framework, and take critical lessons from counterparts in the UK and Europe that have already implemented an open banking framework.
“Recognising the vast potential that an open banking regime can hold for Australian ecosystem participants, the Morrison government has been a strong advocate of ensuring our payments system is fit-for-purpose and that the regulatory settings can encourage greater participation among our current cohort of fintech start-ups,” Steller told Stockhead.
“If Australia’s own open banking framework is to succeed in the years ahead, there must be appropriate recognition by the Big Four that customer retention is no longer guaranteed and banks must improve their digital offerings and tailor their omni-channel banking experiences to remain relevant.”
The UK first implemented APIs in January, 2018, ushering in a new era for financial services in the UK by placing the power squarely in the hands of the UK consumer. Steller said this ultimately made it easier for consumers to port their data across to a different provider.
“Perhaps one area we should look at more closely is establishing a framework of legal responsibility for data security breaches, as this was one of the significant limitations of the UK open banking system,” Steller told Stockhead.
“By including new clauses in their banking terms and conditions surrounding data liability – such as a new alternative dispute resolution scheme – participants in Australia’s system could be better placed to address such data breaches particularly given the growing prevalence of cybercrime.”
In his October Federal Budget speech, Treasurer Josh Frydenberg said that promoting a more innovative and robust payments environment was a pivotal part of the Morrison government’s plan to build “a more competitive and productive economy as we recover from the COVID-19 crisis”.
Seed Space Venture Capital agrees, arguing the regulatory architecture of the payments system in Australia presents a ripe opportunity for change and disruption.
At a time when consumer appetite for using different payment methods, like contactless payments, has accelerated, Steller believes fintech participants can play a role in shaping the future of payments in Australia.
“For Australia’s own system to be successful over the coming years, we must ensure that any standards we have in place can keep pace with new technologies and regulatory change,” Steller said.
“This means ensuring that a change management and governance framework is an early priority so that our system can remain relevant to sector participants.”
According to Steller, the early signs are positive among the attitudes and commitments made by the Morrison government.
He told Stockhead that the government’s present appetite for change is the sign of both “a robust regulatory system” and a “competitive financial services sector” that favours both consumers and nimble fintech providers seeking to capitalise on the resulting opportunities.
“Having set a bold plan forward to drive a post-COVID-19 recovery, the Morrison government is in the driving seat to advance a comprehensive agenda for change as the Consumer Data Right becomes a reality in Australia,” Steller said.
“We just need to make sure we get these settings right and learn both from Europe and the UK’s own respective implementations to ensure Australia can boldly proceed into a brave new world powered by open banking.”
This article was developed in collaboration with Seed Space, a Stockhead advertiser at the time of publishing.
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This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.