Australia’s moves towards open banking and a Consumer Data Right are being slowed by the country’s largest banks which refuse to go beyond the minimum requirements of regulators, according to Gerd Schenkel, founder of Ubank and Telstra Digital.

According to Schenkel, now managing director BGA Digital, the banks are favouring short term commercial success over the interests of their customers by failing to be proactive on data sharing. That reluctance opens the door for foreign tech giants to play the facilitator role in data sharing and identity management, and risks the long term health of the Australian economy, according to Schenkel.

“The major banks are not interested in acting in the interest of the customers,” Schenkel said during a panel discussion at a ForgeRock event on identity management in Sydney yesterday, that included Lisa Schutz, founder and CEO at Verifier, John Heaton-Armstrong, product owner Open Banking, and Ian Sorbello, IAM security consultant (formerly head of product technology HSBC).

“They clearly aren’t because they know that opening this data up, for other services to participate, is good for the customer.”

Open banking and release of consumer data empowers consumers to more easily compare offerings and switch banks. Australia’s big four have all said they support open banking. But Schenkel, argues the big banks are taking a deliberately slow approach, by sticking to the regulators multi year roadmap rather than developing their own open banking initiatives. A strategy motivated by “a short term commercial advantage”.

By utilising the regulator’s roadmap for the rollout of open banking, under which a full system won’t come into effect until midway through 2020, banks arguably delay potential customer churn – an expected result of open banking. The delay ignores customers’ needs now and is driven by shareholder interests, meaning the banks themselves are not “evil”, Schenkel said. But the approach also threatens “longer term innovation and [what is] good for the economy” as it leaves regulators to drive innovation.

“A compliance led and regulatory led roadmap takes a very long time,” Schenkel said.

“And I don’t think time is what we’ve got from an Australian perspective. If you’re an incumbent in Australia and you have four million customers, you’re pretty big, but you’re tiny in the global scale and we haven’t got time to wait for that to play out because we have global tech companies simply providing the services and setting a reality that we have to live in whether we like it or not.”

Schenkel said without a proactive approach to data sharing and identity management companies like Google and Facebook or one of the Chinese tech giants will likely take any vacant innovation opportunities. If successful, those foreign companies could potentially set data and identity standards, hamstringing the Australian economy which would struggle to innovate independently, according to Schenkel.

“If we want to have incumbents survive or national economies to thrive we need to be much quicker with all of this. We haven’t got ten years to let this play out because in five years time we will be using Chinese identities to log into our phones and to log into everything else.

“That’s the reality it’s either going to be some Chinese thing or some Facebook thing. There’s nothing wrong with the Chinese, it just means we loose the ability to have a national anything.”

The move to open data

The federal government is introducing a Consumer Data Right in early 2019. The policy will give consumers the right to direct that their data be shared with others, thereby promoting consumer choice, competition and innovation.

The new right will be applied to the banking sector initially through Open Banking but is expected to be introduced to other sectors like utilities in the future. 

Banking is the focus now because of its impact on the economy and the value of the data being exchanged in an open data system, according to Schenkel. But he argues there is also an opportunity for providers in other industries to “step up” to proactively offer data sharing capabilities beyond what is mandated in regulations.

“If they do so then customers will make a rational decision and participate [in data sharing].”

“It’s the value exchange… If [customers] get something back [they] will share the appropriate data as long as acceptable. Sadly no one’s really stepped up.”

Gerd Schenkel, managing director BGA Digital, speaking at a ForgeRock panel discussion in Sydney. Image Source: ForgeRock

Schenkel argues the so far slow pace of change reveals Australia’s innovation challenge and the role of large incumbents are playing.

“I think it’s not a regulatory question whatsoever. It’s a question of why this country doesn’t have the conditions to become more innovative in its own right and identity management and sharing data is part of that,” Schenkel said.

“We’ve got lots of young people now being entrepreneurs which is great, but they’re hamstrung by incumbents sitting on stuff, including data. How do we solve that? The regulator will not do that.”

Developing an effective identity management system is a vital requirement to facilitate the transfer of data. But so far, Schenkel says, an effective standard hasn’t been developed and if Australia can’t solve its open data and identity management issue soon, someone else will.

The Australian government has developed a useful standard for identity management but it has not been utilised well outside of public services, Schenkel said.

“MyGov actually has 11 and a half million registered and supposedly active users. So that’s not a bad standard. But for some reason business hasn’t embraced the standard.”

“[Identity] standards are really important and actually not that hard to agree on.”

If the private sector doesn’t embrace the MyGov standard or develop its own identity rules it is likely large foreign tech companies will, said Schenkel.

“It’s either going to be Facebook or Google, or something we control in this country. And you’d hope we are big enough and sophisticated enough to have an Australian identity standard emerging. The Government hasn’t stepped up, it could, so hopefully someone else steps up and it will be just a rational choice [to use the standard].”

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