Testimony from Ian Narev, Chief Executive Officer, and David Cohen, Chief Risk Officer, Commonwealth Bank of Australia.
CHAIR [David Colman MP, Federal Member for Banks]: I want to go on the issue of bank account portability—the power of consumers, basicAustralian Securities and Investments Commission (ASIC) is Australia’s corporate, markets and financial services regulator. asic.gov.aually, to get rid of their bank when they are not happy. As you know, there has been a bank account switching service for a number of years. My personal assessment is that it has not had a great deal of impact. My view is that this committee needs to look at ways of giving consumers more power over their bank and more ways for consumers to change to better providers. You have always opposed bank account number portability, which has been an issue that has been raised on previous occasions. The banks have often raised issues around technology and so on. This arose some years ago. Technology has obviously moved on, and it seems to me that this is something that should be assessed again. You are also now opposing the concept of opening up data through open APIs. That would allow consumers at their discretion to allow their personal transaction data to be opened up so that banks could see their data, which would help them to move between banks. As you are probably aware, the UK regulator recently announced that it would require banks to allow open access to transaction data to their competitors, to start-ups and to whoever, with the consent of customers, by 2018—in two years. So there is a broad area here of open access to data, the ability to switch between banks and account portability, which in my view are all in one broad category about the power of the consumer to switch. If the committee recommended that the government mandate ASICAustralian Securities and Investments Commission (ASIC) is Australia’s corporate, markets and financial services regulator. asic.gov.au to force the banks to open transaction data to their competitors and to introduce other mandatory measures to enable easier switching of bank accounts for consumers, what would be your view on that?
Mr Narev : Let me make a couple of general comments, and I might get David to add on a couple of specific points. I want to be clear that we expect a world—and we talk very regularly internally and externally about it—where competition is just going up and up. Our view, expressly stated, has been any major organisation of any sort, particularly in financial services, that rests its future on trying to keep competition out will simply not succeed. Our organisational goal is to adjust to those new circumstances not believe that they will not happen. In terms of the two specific aspects of them, the absolute priority for us is to make sure we are fully supportive of power being put in the hands of customers. We need to make sure that in terms of access to data, security of data, how the data are used those principles are absolutely sacrosanct . We spend an inordinate amount of time and money safeguarding the security of our customers’ data and safeguarding the security of their accounts. Whilst I think the broad proposition of making these things work is in the spirit of competition and making sure that power is in the hands of the consumer, which we support, we need to make sure the discussions and the detail about how this needs to get done do achieve that goal.
CHAIR: Sure. So if ASICAustralian Securities and Investments Commission (ASIC) is Australia’s corporate, markets and financial services regulator. asic.gov.au had the mandate to make it happen, then obviously they would consult with you on your views about the way the systems work and so on. Ultimately, it seems to me it is a decision for the regulator not for you. In the UK that is certainly what has occurred. Is it fair to say that, if ASICAustralian Securities and Investments Commission (ASIC) is Australia’s corporate, markets and financial services regulator. asic.gov.au had such a mandate to require the opening of data and, more generally, the opening up of information so as to enable consumers to more easily basicAustralian Securities and Investments Commission (ASIC) is Australia’s corporate, markets and financial services regulator. asic.gov.aually ditch their bank if they are unhappy with it, you would work cooperatively? You would work constructively with that process?
Mr Narev : We absolutely would—in the same way as we have worked very constructively with the Reserve Bank on the building of the new payments platform. If that were to be the mandate, we would engage very constructively with whomever our elected representatives asked to take oversight of implementing it.
Mr Cohen : Can I just add a quick point there. Back in 2011, when account portability was looked at, Mr Bernie Fraser issued a report, as you are probably aware. One of the issues there that came up and is still relevant today is not a bar, by the way, to implementing portability, but it is something that needs to be thought of, and I guess this is what you are referring to in terms of ASICAustralian Securities and Investments Commission (ASIC) is Australia’s corporate, markets and financial services regulator. asic.gov.au consulting with industry. That issue is that implementing large technology projects across an industry has in the past been fraught with misfortune. So the point made then, which I think still applies today, is: provided we get the security right, the confidentiality and the privacy right, through technology, then I think the information-sharing economy is going to come into play here, definitely. But the important thing also is that it applied to all institutions. So one of the learnings from the past is that smaller institutions have struggled when seeking to implement big technology projects—not because they are poor within themselves but simply because the resources required are significant when implementing an industry-wide program . So the only point I think we would make is that consultation on how to do it is extremely important, and sufficient lead time to do it is extremely important.
Testimony from Shayne Elliott, CEO, and Graham Hodges, Deputy CEO, ANZ Bank
CHAIR: Okay. The other issue I want to raise is the whole issue of account affordability switching and so on. Over a number of years this issue has arisen where consumers want to get rid of their bank because they are unhappy with the performance of the bank. The practical reality is it is a very hard thing to do and it is not an easy process to switch banks, because of all the form filling out and so on. This has been looked at by previous parliaments in various inquiries, but, frankly, not a great deal has happened in this area. Technology has changed things a lot and, as you might be aware, in the UK the regulator is requiring that all banks open up their data—with the consent of consumers, of course—to other banks and financial institutions by 2018. That is going to help consumers to more easily move between banks, because their transaction history will be available. Whenever this issue has arisen in the past, the attitude of the banking sector has generally been to say it is all too hard, there are technology problems, there are privacy issues and we should not do it . Interestingly, pretty much everyone who competes with you thinks it is a good idea, would be good for consumers, should happen and that the privacy issues can be dealt with. If the committee were to recommend that the government mandate ASICAustralian Securities and Investments Commission (ASIC) is Australia’s corporate, markets and financial services regulator. asic.gov.au to force you to open your transaction data—with the consent of your consumers, obviously—to enable competitors to access it and to introduce other measures to make it easier for consumers to switch between bank accounts, what would be your view on that?
Mr Elliott : We would be happy to cooperate. The reality is that today—
CHAIR: Why have you always opposed it in the past then if you say you are happy to cooperate?
Mr Elliott : I think you are right about the new technology—that in the past the technology has not always existed to make that easy. We are, quite rightly, the custodian of our customers’ money and a lot of their data, and over time what we are finding is that that data is of incredible value to our consumers. But we are the custodian of that and we have a responsibility to keep both the money and the data safe and secure. But it is our customers’ data and, if they choose to make that available to other parties, whether it is other banks, fintech or whoever, absolutely we should enable that. Our responsibility is to make sure they do it in a safe and secure way. So there is no resistance from ANZ or from me for doing that; but, as I said, it comes with making sure that there are processes in place to ensure. I think we all know somebody who has been the victim of fraud, phishing attacks or any kind of data-integrity issues, and we just need to make sure that our customers are protected in the process. But that is not an argument for resisting it .
CHAIR: So you have not historically opposed the opening up of data and account portability?
Mr Elliott : I think as an institution we may have. I have not and we do not at this point today oppose it at all.
Mr Hodges : If I may, it is around safeguards around this. I think that, as Shayne said, the issue with customers and the way they manage their finances and also their data is that in most cases it is responsible but it is not in all cases, and we do have a duty of care there. So I think that, if the parties who are looking to access that data are held to a certain standard, that makes that much safer .
CHAIR: Yes, but that is ultimately a matter for the regulator , isn’t it?
Mr Hodges : It is, of course. Just going back to the switching, APCA put in place a process. We check. I think we get about two or three applications a day. It takes about 24 hours for that data to be processed through. So there is a process. It is clunky; you are right. It was put in place some years ago, and technology has moved on, and I think there is an easier way of doing this.
Testimony from Andrew Thorburn, CEO and Antony Cahill, COO, National Australia Bank Limited
CHAIR: I want to ask you about account portability and open data. The UK regulator, as you know, has mandated that by 2018 the UK banks are required to effectively open up APIs to enable consumer data to be accessed by competitors, start-ups and other banks, obviously with the consent of the consumer, and obviously there are privacy issues that you will no doubt address in your answer. But the UK regulator has said that this is good for consumers and has mandated that it should be done. Do you have any issue with the Australian regulator if the committee were to recommend that ASICAustralian Securities and Investments Commission (ASIC) is Australia’s corporate, markets and financial services regulator. asic.gov.au be given a mandate to open up data to improve this whole area of account portability and switching, which has not worked well for consumers in the past? Would you seek to stand in the way that or would you support it?
Mr Thorburn : I would like to expand on the answer, but the short answer is that we would support it. Perhaps, Antony, I could cover the account portability and you can do the data one.
Mr Cahill : Yes.
Mr Thorburn : Overall, we welcome competition. That is how this bank has survived and competed for 150 years. And now we have new competition—FinTecs that are coming at us—and we welcome that, too. We have to lift and get better, and that is good for customers. So, in principle here—no problems whatsoever. On the point of account portability, we welcome that, too. Actually, I think the work that is being done as part of the new payments platform, which will go live at the end of next year, will seamlessly and easily allow that to occur for customers. So actually I think a lot of the mechanics and the investment that the banks are spending on the new payments platform will enable account portability by the end of next year to actually occur, and we welcome that.
CHAIR: If you could address the data piece, Mr Cahill.
Mr Cahill : In terms of account portability, if I could just expand on that slightly to ensure that that is understood by the committee members, the new payments platform will be coming on-stream next year. That is an investment overall by the industry of around about $1 billion to enable that to happen. There are two components of this. Firstly, the ability for a customer to open a new bank account with a financial institution today is now extremely easy, with most providers enabling customers to do so through digital platforms, in addition to go into branches or doing it over the phone et cetera.
One of the traditional issues for customers has been not necessarily moving bank accounts but is in relation to direct debits or credits going into and out of that particular account. The new payments platform will provide all Australian consumers with an alias ID—they can use their mobile phone number or an email address—and they can associate that alias ID with their bank account. So, Mr Chairman, if you had a bank account with another bank today and you came to NAB—and we welcome you to come to us—you would be able to go to the new payments platform and go to your alias ID and change your account number. None of your direct debits or credits would then need to be changed, so that should be largely resolved.
CHAIR: Yes. The governor addressed this issue in the Reserve Bank hearing a couple of weeks ago. That is welcome, but there is obviously the issue of people wanting to get rid of their bank more easily as well. That is where the account portability comes in. In relation to the data question, it is good to hear that you are open to that. We have talked a lot about remuneration and incentives in these hearings and it is so important to link incentives to outcomes. If we all acknowledge that opening up data is good for stimulating competition, getting a better deal for consumers and enabling people to switch more easily, would you as the chief executive be open to providing a specific financial incentive to your senior IT executives in particular to work constructively with ASICAustralian Securities and Investments Commission (ASIC) is Australia’s corporate, markets and financial services regulator. asic.gov.au on the opening up of the bank’s data for the purpose of increased opposition?
Mr Thorburn : I think there are a lot of things that are in executives’ and people’s basicAustralian Securities and Investments Commission (ASIC) is Australia’s corporate, markets and financial services regulator. asic.gov.au jobs which we do not necessarily have to incentivise. We expect them to do it, and so—
CHAIR: But, with respect, I think the banks have not demonstrated a willingness to open up data in this manner in the past. If you as the chief executive are saying that you think it is a good thing, that it would be good for consumers—and obviously your published values focus on the importance of the centrality of the consumer—presumably it would be entirely consistent with that for you to provide a significant financial incentive to your senior IT executives to open up that data for the benefit of consumers.
Mr Thorburn : Let’s do this in two parts. Antony, I think you should talk about what we have done with data, because actually I think we already have a very good record of leading in this space—a ‘listen to what I do’ type concept. So we are already doing things in this space. Then I will come back to the IT piece.
Mr Cahill : In relation to data sharing, the top principle is absolutely that we welcome competition. In terms of data sharing, if that can generate better outcomes for customers, we would support that in principle . So I would point the committee to the fact that at the moment we as a major bank are currently participating in the comprehensive credit reporting regime. We are sharing our data currently in private mode with the bureaus. So we are ensuring that our systems and our approaches will be ready to participate in that regime as we go forwards. That is clearly an area where there is significant focus in the industry at the moment—in relation to sharing customer data to effectively generate more competition and provide better outcomes for customers. So we are participating in the credit reporting regime.
In relation to opening up our data more broadly, and in actual fact sharing customers’ data with other institutions, we agree with that in principle. The key question for us is ensuring that the correct protocols and security regimes are in place . From our perspective, trust is the key thing that we have with our customers. If we were to lose that trust in a data breach or a privacy breach, then we would take that very seriously.
CHAIR: Indeed, and nobody on the committee would be suggesting any different. Obviously the privacy of consumers is paramount. The UK regulator has concluded that those issues can be addressed. Whilst it is interesting to express in principle support, what matters is performance. That is why I asked the question, Mr Thorburn, about whether you would be open to providing financial incentives to your senior executives, particularly within IT, to ensure that this actually happens.
Mr Thorburn : The first thing is behaviour does count—you are absolutely right—but we are actually really active in the CCR space at the moment with data sharing. So we are involved and doing it quite actively. But let me take on notice—
CHAIR: I have asked you probably three or four times now and you have not addressed the question. So do I take that as a no?
Mr Thorburn : No. I am committing to you that, in the case of account portability and data sharing, we support it. I would like to take on notice the best way for me to lead our company to make sure those two things happen. You are asking for a very specific piece and I am committing to the principle.
Testimony from Brian Hartzer CEO and Managing Director and Peter King, CFO, Westpac Group
CHAIR: We will write to you in relation to that issue as well, particularly with respect to your internal processes for disciplining senior executives who are involved in malfeasance. I want to come to a number of policy issues, and a number of these I have discussed with chief executives earlier in the week. This issue about opening up data is something that the committee may well take an interest in. As you know, the UK regulator has recently announced that it will require banks to open up APIs to enable consumer data to be more freely accessed, of course, with the consent of that consumer, which will benefit consumers in an enabling them to access other products and services from other financial service providers.
During the testimony of this week, I think it is fair to say that your industry has expressed a distinct openness, apparently, to doing this and yet I think it is also fair to say that it historically has strongly opposed these sorts of measures . Do you agree—with the important caveat of protecting privacy—that data should be opened up to enable a more competitive market, that it should be possible for consumers to have portability of their accounts and to switch more easily and that it would potentially be an appropriate recommendation of this committee to seek to mandate ASICAustralian Securities and Investments Commission (ASIC) is Australia’s corporate, markets and financial services regulator. asic.gov.au to make all that happen?
Mr Hartzer : There are a couple of different questions in there that are all related. I might talk about them in different areas. I have had experience with this both here and overseas in some of these discussions. On the issue of opening data up, we are supportive of a well-governed process of opening data up more. We are supportive of more competition; we think that it is healthy for customers and healthy for our industry as well. Westpac is on the record: we made a submission to the Productivity Commission saying that we supported an open data architecture .
CHAIR: Sorry to interrupt, but as I understand it your competitors did not do that and they did the opposite. Do you think that is noteworthy?
Mr Hartzer : I could not speculate on what their motivations are. We are clear that changes in technology are very substantial in our industry. It is having a massive effect. It is changing the way customers deal with us and it is changing the way we run our business. Data is a really important part of what we do. At Westpac, we are embracing that. We believe that it is appropriate that more access to data is made available to enhance competition. The point I would make, though, is that you cannot just pass off without serious consideration the governance framework around data, because some of the suggestions about wide-open APIs that just let people get access to anyone’s personal information are potentially quite risky. Banks like Westpac have very strict controls, regulations and governance—even within the company—around who can access what data. All we would be saying is that we are very supportive, but do not underplay how important it is to put that control around .
Just to move on from that a little bit or to extend from that, data is already available. As a Westpac customer, you can go online and you can download all your transaction data right now into an excel spreadsheet, if you like, and take it to anyone you like. The point is that it is your data and you have logged in through our security protocols so that we know it is you. Therefore, we give you the access. You can do that right now. All we are saying is that before you just make it really easy so that anyone can put a little software code in and get anyone’s financial data, you want to be a little careful. Some of the people who are advocating for this, I have to say, do not necessarily have the same security or governance standards around their data . You just want to be a little careful. That is all we have said.
CHAIR: Sure, of course. That is why, obviously, ASICAustralian Securities and Investments Commission (ASIC) is Australia’s corporate, markets and financial services regulator. asic.gov.au—as the regulator—would be the appropriate body to govern such a process and to make sure those protections in place . But you are obviously expressing a great openness to the idea. Just to put a question that I put to Mr Thorburn this morning: would you be open to providing financial incentives to your senior executives based on the openness of data and the capacity for consumers to easily and quickly switch bank accounts and to make portable their accounts? That is clearly in the interests of consumers and, as I understand it, the centrality of the consumer is part of your values.
Mr Hartzer : Anything that the regulators change in terms of the rules we will obviously comply with, and that—
CHAIR: I meant it being distinctly promoted as something you want to happen because it is good for consumers.
Mr Hartzer : We put a submission into the Productivity Commission saying that Westpac’s position is that this should happen under an appropriate governance framework. On the switching point, we also promote that. The fact is that, again, you can do that now. A customer can open an account with Westpac, online, in less than three minutes, and in less than 10 minutes they can switch all their payments from another provider—and I encourage you all to give it a try. You can do it right now. We do that today. Therefore, we are quite happy for that to become a standard.