Reform recommendations include the requirement for banks to open access to customer data, while equity crowd-funding gets a boost from new legislation opening the model to retail investors
The global nature of the open banking phenomenon has been reinforced by recommendations for banking sector reform in Australia in a report tabled in parliament by The House of Representatives Standing Committee on Economics.
Among the recommendations are the stipulation that banks be “forced to open up access to consumer data by 1 July 2018, which will give consumers much greater options when seeking to switch banks”.
The report contains a series of other proposals designed to improve competition in the Australian banking sector, including the creation of a new, permanent regulatory function focused on day-to-day monitoring of competition in the banking sector, a review of the regulatory barriers to starting a bank, with the goal of injecting more competition into the sector, and a review of the regulatory barriers to starting a bank, with the goal of injecting more competition into the sector.
While other recommendations in the report – namely those designed to tighten up the regime around consumer protection and executive accountability – have garnered strong interest in the media and among industry commentators, the enhanced competition and open banking components will have a profound impact on banks’ IT and strategic thinking going forward.
Indeed, as Finextra’s latest research on open banking uncovered, leading Australian banks are already taking steps to emulate the approach of European banks to open APIs, despite not being impacted directly by the European regulation PSD2. As one said: “In our view, open banking and open APIs are important for us because they will help to fuel the integration of our multinational customers operating or based in Europe. What’s going to happen is that these multinationals doing business in Europe will want to do business in the same way globally and if we want those multinationals as customers – even if we are not specifically impacted by PSD2 – we are preparing ourselves to operate in a world that operates in a similar way.”
This bank already has a strategy “around opening up the front door and developing integration through APIs”, he continued, and a second Australian contributor to the research also confirmed his bank has a strategy for “API enablement and restructuring internal architectures, technology and operations to better embrace third party capabilities”.
Meanwhile, equity crowdfunding in Australia received a boost as the Corporations Amendment (Crowd-Sourced Funding) Bill was reintroduced into Parliament, after being shelved by the Australian government earlier this year. The amended bill enables unlisted public companies with less than AU$25 million in gross assets and less than AU$25 million in annual turnover to raise capital via crowdsourced equity funding. Specifically, they will be able to raise up to AU$5 million in any 12-month period through local equity crowdfunding platforms such as Equitise and VentureCrowd.
The new bill would also open up this investment opportunity to retail investors, who would be able to invest up to AU$10,000 per company per year, with a 48-hour cooling-off period.
Private companies would still be prevented from raising funds from the public under the new legislation, but, according to Treasurer Scott Morrison, the government is discussing the possibility of extending this option to them during next year. In a statement Morrison also said: "The legislation will complement the Turnbull government's existing financial sector and innovation policies including the push for an internationally competitive fintech industry, new tax incentives for angel investors and start-ups, and changes to the tax treatment of crypto currencies."