An ASX-listed company said that in order to ensure timely adoption and compliance and to prevent anti-competitive, delaying tactics in Australia's banking and insurance sectors, a system for securely sharing customer data between institutions should be mandated.
In response to a recent Productivity Commission report, insurance comparison website iSelect said the launch of open data application programming interfaces (API) could help consumers get a fairer deal, Australian Financial Review
"Over our 16 years of operations, we have encountered numerous occasions where businesses have used high levels of industry jargon, excessive complexity in product development and marketing around frustrating access to data which, under the nebulous guise of customer 'retention,' we believe is tantamount to anti-competitive behaviour,” Scott Wilson, iSelect CEO, said in the company's submission.
"iSelect recommends that the new data framework incorporates the mandating of an open API system for banks and other organisations to securely share their consumer data, and be subject to strict customer consent parameters."
Wilson expressed concern that in the banks' and insurers' desire to retain consumers, the companies might “delay settlement or only offer a discount once a customer decides to move to another bank,” the report said.
"The bit that is anti-competitive is if you intentionally frustrate a customer and, for us, we see the apathy of consumers who get overwhelmed by the process," Wilson said. "We have a fundamental belief that consumers should have access to their own information and make an informed choice."
A study by the Queensland University of Technology found that Aussies waste $11.6 billion annually by staying with their incumbent provider instead of shopping around, AFR
iSelect's submission was made in response to a report released by the Productivity Commission at the end of last year. The report indicated that implementing technology-based laws to regulate customer data sharing across industries might not be the best solution, AFR
"The great difficulty with specifying a technology [such as APIs] to be used for a purpose of exchange in a regulatory fashion is that you get stranded laws which refer to a specific technology and risks hampering innovation in the future,” said Peter Harris, Productivity Commission chairman.
In November, the parliamentary inquiry into the banks called for aggressive timelines for the creation of an open-access regime for customer data, in the hope of boosting competition and make pricing more transparent.
Harris said that while he supported the parliamentary inquiry findings, he hoped that rather than legislating based on current technology options — which could quickly become outdated — broader legislation that enshrined standards and principles of openness would be adopted.
"Surprising though it may be to many, individuals have no rights to ownership of the data that is collected about them,” Harris said. “Data is increasingly an asset, and when you create an asset you should have the ability to use it, or not, at your choice.
"We are proposing the creation of a comprehensive right to data control for consumers that would give people the right to access their data, and direct that it be sent to another party, such as a new doctor, insurance company or bank,” he said. “Plus an expanded right for people to opt out of data-collecting activities. And existing privacy laws would all remain in place."
George Lucas, chief executive of fintech Acorns Australia, did not agree that mandating for an open API system would solve the problem.
"The issue is about legalising the existing ePayment code as recommended in the Financial System Inquiry and privacy rules so it is clear to the banks that they don't own the data, that customers can consent to who access their data held by banks, that banks can't block this access if the client has given consent, who is liable if there is a breach," he said. "Basically the banks want to control on what terms and what data can be shared."
In its draft report, the commission stressed that the "private sector is likely to be best placed to determine sector-specific standards for its data sharing between firms."
This recommendation is supported by the National Australia Bank (NAB) in its submission, which said that statutory requirements for data sharing would be expensive and hamper innovation, ASF
"In principle, NAB agrees with sharing customers' data with other institutions, providing the appropriate security arrangements are in place and that institutions which received this data accord the same high premium to data protection as NAB does," NAB said. "NAB urges caution against the adoption of statutory mandatory requirements for data sharing due to the impact on innovation already occurring, the cost of mandating and ensuring appropriate security concerns."
On the other hand, Wilson said that iSelect recommended that Australia follow Britain's lead and require banks and other organisations securely share data with third parties from 2018, the report said.
"By opening their history, financial services customers will be able to shop to find a product which better suits their needs," he said. "This is especially important in the home loans area, where the major banks still control more than a 70 per cent market share.
"The financial services sector needs a shake-up in competition levels and empowering consumers with better information and educating them on their choices would improve Australia's productivity and economy, while cutting costs,” Wilson added.
The inquiry report is expected to be released to the government in March.
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