With the Productivity Commission, the Politics of Data Rears its Head

By David Tuckwell on Wednesday 14 December 2016

Alternative Lending

The Productivity Commission has pushed back on suggestions from the Australian fintech community that the government should force banks to share their customers’ credit data.

In a 600-plus-page draft report, the deadline for comment on which fell 12 December, the influential government advisory body recommended that consumers and market forces should shape credit data availability, not regulation.

“There is little information on the number of customers that would [use] their transactions data”, the report concluded.

“However, there would be implementation costs for financial service providers and these would be relatively more burdensome for smaller providers… and possibly reduce incentives for data custodians to invest.”

The report said there was no international precedent for creating a wide-reaching data sharing regime, and mandating that banks share their customers’ credit data raised privacy issues.

Fintech startups have long argued that a major source of the big banks’ market power is their “information monopoly” and have lobbied hard for a mandatory “Comprehensive Credit Reporting” regime to shake things up.

The big banks have lobbied for the opposite, arguing that customer data costs them millions to gather and mandatory data sharing, of the kind pushed for by fintech disrupters, raises security concerns.

The politics of CCR came to a boil in this year’s election in which it was subject to positioning by the major political parties. The Australian Labour Party, which was closer to the fintech position, supported mandatory CCR. The Liberal National coalition, which leaned closer to the major banks’ position, opposed.

Reacting to the report, FinTech Australia, the peak industry body, welcomed the “direction” of the report as a “tremendous step forward”. But said they were “disappointed” that the review did not recommend mandatory CCR.

The Australian Banking Association and the Australian Retail Credit Association – the two major bank lobbies – have issued no media statements on the report. Both made submissions to the Commission.

In his speech on the report, Treasurer Scott Morrison said “the government understands the importance of a move towards unified open aggregated financial data standards in order to legitimise the current practices employed by fintech innovators.”

The final report is due for release in March 2017.

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