The Productivity Commission invited Tyro to a conference in Canberra to harvest new and novel ideas for a structural reform process seeking to improve Australia’s productivity performance. It was fascinating to learn about the many levers available to drive productivity and efficiency. Some of the ideas advanced by participants were:
- Public funding and tax advantages to new businesses and growth companies rather than SMEs
- New ways to politically market data and fact based policies in the new post-truth era
- A mind set of prevention like investment into early childhood, against obesity and domestic violence instead of acute crisis management and curing
- Shift of investment from regional Australia to the far more efficient high density city centres
- Focus on common grounds and achievable step-by-step reforms
- Holding opposition parties as much to account as government
Tyro argued that Open Banking was a huge opportunity for Australia’s future prosperity.
Banking is indeed ripe for disruption. Banks enjoy a $40 billion profit pool. SMEs suffer from $7 billion cost p.a. in banking frictions and from a $60 billion shortfall in cash flow-based lending. Some of the ideas we advanced were:
- Smart regulation as a competitive advantage to enable Australia to become the Asian-Pacific hub for fintech. It is not about more regulation, deregulation or self-regulation, but smart regulation. For that the regulators need an innovation and competition mandate as well as the required resources to retain best and brightest talent.
- Mandating banks to offer Open Data and Open APIs by an ambitious deadline, so as to offer Australian consumers more choice by enabling new competitors to access the banking system. The European Payment Services Directive mandates such Open Banking by the beginning of 2018.
- Invitation or if necessary mandating the major retail banks to offer Australian consumers to share their know-your-customer credentials (KYC) with other regulated entities. The frictions discouraging today the switching to a more attractive provider would be dramatically reduced and Australia would leapfrog the rest of the world with such a pragmatic digital identity solution.
- Open up government procurement to innovators by using micro tenders or by specifying products and services so that they can be provided by multiple accredited providers. Medicare Easyclaim was a best practice case allowing CBA and Tyro to compete for the delivery of real-time rebates.
When digital innovation starts to disrupt an industry, a window of opportunity opens up. In banking this is happening now. If Australia creates the regulatory environment of Open Banking, it can establish itself as a leader in the field.
“We have a very strong, very well-regulated financial services sector. Innovation is going to be a very big part of it and we have to work with you to make sure that regulation enables innovation, rather than constraining it”, said Malcolm Turnbull speaking at a Financial Services Council (FSC) breakfast in Sydney.
We call it Smart Regulation. We call for robust mandates opening up banking.