Transcript
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Acknowledgement of country
I wish to acknowledge the Traditional Custodians of the land we are meeting on today, the Gadigal people of the Eora nation.
I pay my respects to them and their cultures and to their Elders past, present and emerging. I acknowledge their continuing connection to the land, sea and community.
I would also like to acknowledge and pay my respects to Aboriginal and Torres Strait Islander people who are attending today’s event.
Introduction
I am delighted to be speaking to you today about the ACCC’s work and priorities in the banking and financial sectors.
Our work, even when you narrow it down to how it relates specifically to financial services, is vast.
From taking strong enforcement action when we consider someone is engaging in anti-competitive conduct, contributing to the development of payments regulation policy to running inquiries into specific financial markets, facilitating open banking and combating scams, the ACCC’s remit is extensive.
It is with this large body of work and responsibility in mind, that I address you today, as leaders of the sector.
Global uncertainties
Each of us is aware of the weight of global uncertainties.
Geopolitical tensions and uncertainties are high. The war in Ukraine has affected key global markets including energy, defence products and food, with likely ramifications beyond the end of the conflict as countries seek alternative sources of supply to protect from dependence and exposure to similar disruption in the future.
There is close focus on the rise in inflation and the response of central banks across the globe to raise interest rates to moderate that increase.
The IPCC just delivered a “final warning” on the climate crisis and that the time is now to take the necessary action.
The collapse of Silicon Valley Bank, Signature Bank and Credit Suisse and declines in the shares of certain US, UK and European Banks have prompted Central banks and Governments to give assurances that their banks and banking systems are sound. In these uncertain times, the voice of competition and consumers remains important.
Indeed, ensuring markets continue to work fairly and competitively is more important than ever as cost of living pressures affect many Australians.
Financial services
A competitive financial services sector is essential to ensure consumers’ needs are met.
Financial services are central to how Australian consumers live and do business.
It is critically important that these markets are competitive so that services are able to be developed to meet evolving consumer needs. This is especially vital to Australians facing cost of living pressures and rising home loan interest rates.
Promoting effective competition and investigating allegations of anti-competitive conduct in the financial services sector remains a top priority for the ACCC.
Cases we have before the Federal Court, like our action against MasterCard for alleged anti-competitive conduct in response to the RBA’s least cost routing initiative shows that the ACCC will not hesitate to take strong enforcement action where necessary.
Of course, our role in this sector is multi-faceted, combining strong enforcement action with a proactive approach to identifying issues and working to raise compliance and best practice across the sector. This means working closely with our fellow regulators and industry members to promote competition.
For example, our focus on competition in payment services includes engagement with the comprehensive reform of payments system regulation, which is currently underway.
We are contributing to the development of the government’s overarching strategic plan for the payments system, as well as engaging on discrete policy workstreams, to ensure that the regulatory framework for payments is designed to facilitate competition, innovation and good consumer outcomes.
The ACCC is also looking forward to playing a key role in the Government’s plans to increase competition in clearing and settlement services, should the Parliament agree with the Government’s draft legislation announced last week.
One of our most important tools is our role in conducting in-depth market inquiries, and we welcome the Treasurer’s directions to undertake a number of inquiries in this sector.
Being able to conduct these inquiries is pivotal to our role as the national competition champion because it allows us to engage deeply on competition issues arising in particular sectors.
It also allows us to work with industry and other regulators to identify solutions for emerging problems and areas of potential market failure.
In the past year we have commenced two inquiries in the financial services sector.
In December last year, we released our first report in our five-year inquiry, monitoring the effects of the government’s cyclone and cyclone-related flood damage reinsurance pool which is aimed at improving the affordability and accessibility of insurance for households and businesses in cyclone prone areas of Australia.
Over the course of this inquiry, we will be continuing to engage with businesses and communities to understand and evaluate the impact of the reinsurance pool.
More recently, we have commenced our inquiry into retail deposit products, following a direction from the Treasurer. This focus is also being seen overseas with the UK Treasury Committee of MPs announcing last week that it was writing to the Financial Conduct Authority to look at similar questions.
Deposit Interest Rate inquiry
Nearly all Australians rely on a bank, credit union or building society to hold and grow their savings. For many, the interest they earn on these savings is an important source of income.
In a period of rapid RBA rate rises, consumers are understandably eager to ensure they are receiving a good deal from their financial institution on their savings.
After all, Australian households together hold more than $1.3 trillion in deposit accounts.
We are also mindful of the critical role that deposits play in our banking system.
As such, we look forward to constructively engaging the sector and other stakeholders throughout the year as we examine the competition and consumer issues affecting these markets.
To inform the ACCC’s inquiry, we will be requesting information from suppliers of retail deposit products, and working closely with other financial regulators to draw on their expertise and data.
We will also soon release a public issues paper, seeking stakeholder input on a range of issues. These will include:
- how banks and other authorised deposit-taking institutions set their rates on retail deposit products
- how their approaches differ from rate setting for credit products
- the role of deposits in their overall funding mix, and
- consumer information and switching.
I urge you all to consider a submission in response to the issues paper, and to participate in this inquiry more generally.
The Retail Deposits Inquiry provides an important opportunity to improve transparency on how banks set interest rates for savers, including the role of promotional rates.
We are keen to understand the different approaches that suppliers have taken in light of cash rate changes, particularly between their deposit and credit products.
This consideration will, in turn, inform our understanding of the nature and extent of competition for retail deposits.
Of course, any analysis of competition also needs to consider the demand side.
The ACCC will be seeking a deeper understanding of consumers’ interactions with suppliers and products. We are particularly interested in understanding the extent of, and any impediments to, consumers switching between deposit products or suppliers.
We will be doing this as the consumer data right in banking sees increasing participation.
Consumer Data Right
The ACCC is proud of the role it has played in delivering the Consumer Data Right in banking, or open banking, as it may be more generally known.
The Consumer Data Right provides consumers with the ability to share their data – with their informed consent - with trusted and accredited third parties. These third parties can use this data to provide products, services and insights that benefit consumers.
From our role in accrediting those third party data recipients, providing regulatory guidance and enforcing the CDR rules to building, operating and securing the technology that enables the Consumer Data Right, we are grateful for the overall positive engagement with the financial services sector so far.
It is good to see growing industry and consumer use of the CDR. For example, some lenders and mortgage brokers are already using CDR consumer data to provide better lending services and more convenient application verification .
We’re continuing to accredit new data recipients and activate CDR products, and we expect to see more activity in the near future especially as adoption increases.
Good quality data is, however, essential to making sure the CDR is reliable and can fulfil its objective.
This is why data quality is one of the highest priorities for our CDR regulatory work.
Unfortunately, there have been some challenges with CDR data quality. Not all data holders have been able to comply fully with what is required and we expect those businesses to actively manage their CDR solutions and promptly address data quality incidents.
In addition to educating CDR participants with guidance and other industry engagement programs, the ACCC has significant tools in enforcing CDR Rules and standards including compliance assessments, the issuing of infringement notices and potential court action.
As evidenced by our busy CDR regulatory work, I hope it is abundantly clear we are not afraid to use any of these tools at our disposal.
Australia’s CDR is a reform that has consumers firmly at its centre and is founded on strong protections, including a fundamental role for consumer consent. We know that consumers will only be willing to use CDR if there are high levels of consumer trust.
Maintaining these strong consumer protections, as well as privacy and information security safeguards will be essential as the roll out of the CDR continues and gathers pace.
We look forward to working with participants in the financial services industry as well as CDR co-regulators, the OAIC, Treasury and the Data Standards Body to ensure that all CDR participants and consumers are clear in what their obligations and rights are.
Scams
As I talk to a room full of leaders in the financial and banking sector, scams are something I must mention and urge you all to re-double your efforts in helping keep Australians safe.
Scams are increasingly common with more people receiving scam messages, advertisements and phone calls, leading to increased losses.
During 2022, financial losses reported to ACCC Scamwatch totalled more than $569 million and we know only 13% of victims report to Scamwatch.
Our Targeting Scams report, which will be published soon is sadly expected to report much higher losses than the $1.8 billion reported in 2021 to Scamwatch, ReportCyber, financial organisations and other government agencies.
Investment scams continue to cause the most financial harm to consumers making up 66% of all financial losses reported to Scamwatch in 2022.
And we are also aware of a significant rise in the number of bank impersonation scams, robbing Australians of their life savings.
Scammers are using new technology to trick their victims, by making their call appear to come from the bank’s legitimate phone number or by sending a text that appears in the same conversation thread as genuine bank messages.
Most recently we have heard reports of the ability to artificial intelligence being used to mimic voice successfully with the potential to fool voice recognition. Scammers are all too ready and able to innovate.
Scamwatch received more than 14,600 reports about bank impersonation scams in 2022, resulting in more than $20 million in losses. Of course, scams like these not only cause financial distress, but also emotional devastation.
As many of you may be aware, last October, the Government announced seed funding for the ACCC to work with other government agencies, law enforcement and the private sector to advise on the establishment of the National Anti-Scam Centre. Indeed, there have been a number of workshops and discussions that many of you may have attended in recent months.
The collaborative nature of how we all are working to establish the National Anti-Scam Centre is vital to the success of our work in combatting scams.
With your assistance and the collaborative work we are doing with others, we have the power to make Australia a harder target for scammers.
One of the ACCC’s key initiatives against scams, which the banking and finance sector needs to contribute more to, is the implementation of efforts to prevent funds reaching scammers.
Financial institutions are in a unique position to help and more needs to be done to ensure banks are detecting and blocking scam transactions.
This is because, despite the rise in cryptocurrency payments, traditional bank transfers are among the most common payment methods to scammers.
In 2022, more than $210 million of losses was reported to Scamwatch as paid via bank transfer. Losses by bank transfer increased by a staggering 63% in just one year.
We are encouraged to see banks taking promising steps towards enhancing protections for their customers.
The Commonwealth Bank for example has begun putting in place processes for consumers to verify calls from their bank through their app and giving consumers an indication of whether CBA, using its own data, can find a match between the BSB and account name entered for a transaction.
Westpac has also enabled a process where if it detects something suspicious that could be a scam or if the account name doesn’t match, Westpac will send an SMS to their customer to verify and hold the funds for four hours just in case a scam is occurring.
Unfortunately, there are still significant gaps between sectors, between banks, and between regulators that scammers exploit to steal money from customers. So we would like to see initiatives that apply across the sector, knowing that scammers will target the weakest link.
As scammers become more sophisticated, so too must regulators and the financial sector if we are to succeed in providing meaningful protection to Australians.
The ACCC looks forward to working with the private sector to increase protections for consumers.
Overall, we have six steps we want to progress further with banks and financial institutions:
- Place consumers, with particular focus on consumers experiencing vulnerability, at the centre of all solutions
- prevent scammers from opening accounts at your institutions
- continually evolve system ability to identify and block suspicious transactions
- intervene to warn your customers when you identify suspicious transactions
- introduce confirmation of payees to reduce the losses to scams that we are seeing, especially through payment redirection scams (otherwise known as Business Email Compromise scams)
- stay on top of scam trends and alert your frontline employees and customers to current scams and ways to protect customers
Conclusion
The ACCC as Australia’s competition and consumer regulator has a steadfast determination to ensure our competition and consumer protections are enforced and our work to promote fair and efficient markets remains unwavering across the economy, including in the financial services sector.
This summit gives me a valuable opportunity to expand on our compliance and enforcement priorities and to share practical steps to raise compliance and best practice across the sector.