The first report of a parliamentary committee scrutinising the operations of Australia’s Big Four banks has called for the government to mandate the API-based sharing of the customer and small business data held by banks.
The move would deliver more control to customers over their data, argued the report, which was tabled yesterday.
For example, it could make it easier for a customer to employ a third party service to assess whether they should shift to an alternative financial institution, by giving them an estimate on the benefits they would see based on their actual banking activity.
“At present banks, not consumers, hold the data,” the report states. “This gives banks a significant degree of power.”
Banks should be “forced to provide open access to customer and small business data by July 2018,” the report states.
The Australian Securities and Investments Commission (ASIC) should be tasked with developing a binding framework for the data to be shared, “making use of Application Programming Interfaces (APIs) and ensuring that appropriate privacy safe guards are in place.”
In addition, banks should also be required to publish the terms and conditions for each of their products in a standardised machine-readable format, in order to facilitate easier comparison of products across institutions.
The data to be shared could include a customer’s transaction history, account balances, credit card usage, and mortgage repayments.
The report cites moves in the UK, where the Competition and Markets Authority requires banks by early 2018 to enable retail customers and small businesses to share their data securely with other banks and with authorised third parties using APIs.
A draft Productivity Commission report endorsed the principle that individuals should control their own data. However, the parliamentary inquiry rejected arguments in the draft PC report that claimed that non-API-based data sharing could be an effective solution for the financial sector.
The draft PC report noted that making bank customer data “available through APIs would almost certainly facilitate more efficient comparison of financial services and products, leading to greater competition and improved consumer outcomes”. However, the PC draft report said, “it is not clear how material these benefits would be for customers”.
The report added: “Moreover, the costs of building APIs could be relatively large, and would have a relatively larger impact on smaller financial firms. That said, there could be less expensive technological solutions that would be fit for purpose — such as publication of this data in a CSV [comma separated values] document (with an industry agreed layout/format).”
The parliamentary inquiry’s report raised a number of objections to the use of CSV-based or similar schemes for exchange data, including that it would increase the transaction costs for consumers and service providers compared to using APIs and that “the need to standardise the data in CSV files means that their contents could not rapidly change in response to the market’s changing data needs”.