Submission to the Select Committee on Fintech and Regtech

October 2019: This submission is to the Senate Select Committee on Fintech and Regtech. Visit our government submissions hub for more Finder submissions to government consultations and inquiries.

Finder would like to recommend three issues for consideration by the Select Committee including:

• Introducing "write-access" into the Consumer Data Right legislation
• Introducing Consumer Data Right to the market for superannuation
• Introducing Consumer Data Right to the market for car insurance

Issue 1: ​Introducing write-access into the Consumer Data Right legislation

Finder has been very supportive of the introduction of Consumer Data Right (CDR) in Australia. We believe CDR will empower Australians to take control of their personal data and equip them with the information they need to make better financial decisions. As our business sits across many of the impacted categories, we look forward to helping Australians connect the dots between their newly available datasets. In recognition of this, we have been proactively supporting the development of CDR by working closely with the Treasury, ACCC and Data61 on different parts of the legislation including a bespoke report to test the product reference data released in July 2019 against the data in our product database.

One area of concern, however, is the need to fast-track legislation of "write-access" for banking data in Australia. To date, the CDR legislation in Australia legislates only for "read-access" for banking data. This position stands in contrast to most other implementations of open banking in jurisdictions like the UK, Japan and the European Union. Broadly, we define our view of the two ways to access data below:

• Read access ​– allows accredited data recipients to obtain a copy of a customer's financial data and use it for activities like insight generation or account aggregation
• Write access​ – allows accredited data recipients to make changes to a customer's
  financial data held by other institutions and to use this access for activities such as account switching or even payment initiation

In summary, ​read-only CDR​ gives customers powerful insights about the way they spend money but it's actually​ write-access CDR t​hat gives them the power to act on these insights quickly. Without write-access a customer still has to go through the same slow process to change provider or make/cancel a payment. Write-access CDR could act as an antidote to the inertia we see today in the retail banking market.

We recognise that introducing write-access will require higher minimum standards when it comes to information security. We also acknowledge that setting and implementing these security standards will take some time. It is for these reasons that the implementation of write-access in the CDR framework should start today to create the time to do this well. If we do not act today, and write-access CDR takes 3-5 years to implement as it has been rumoured, Australia will be left behind in the global competition for fintech innovation. We also believe that setting higher standards for information security in the CDR framework will provide an exciting business opportunity for ambitious Australian regtech businesses.

Issue 2: ​Introducing Consumer Data Right to the market for superannuation

For many years we've been helping Australians make decisions about their superannuation. A section of Finder assists consumers with ​comparing superannuation funds​ and we have undertaken a significant amount of consumer research on the topic. We have consistently found that engagement in this category is relatively low compared to the other categories covered by Finder. We've highlighted some of our key findings below:

• 36% of Australians with money in a superannuation fund either do not believe they are getting a good deal or are not sure if they are or not. However, just 6% of Australians with money in a superannuation fund plan on switching to a different fund in the next 6 months (October 2019 survey with 1,474 respondents)
• Just 18% of Australians make extra contributions to their superannuation above the mandated employer contribution (February 2019 survey with 2,027 respondents)
• More than 82% of Australians opted for their employer's preferred superannuation fund or stayed with their existing fund when they started their current role (July 2018 survey with 2,011 respondents)

As a result, we agree with Recommendation 13 from the ​Productivity Commission inquiry into superannuation​ that Consumer Data Right should be rolled out to superannuation. As noted by the ACCC, CDR is intended to "improve consumers' ability to compare and switch between products and services. It will also encourage competition between service providers, leading not only to better prices for customers but also more innovative products and services". We believe that increased competition and innovation in the superannuation industry will be hugely beneficial to Australian consumers.

Lead with product reference data for superannuation funds
We recognise that working through the full CDR designation instrument for the superannuation industry will take time. However, a quicker way to boost competition in this sector could be to make product reference data publically available in a machine-readable format in relation to superannuation funds. We would like to see a consistent API from all providers that allows us to access accurate and up-to-date information on fund performance, fee structure and feature information for all (or at least the largest) super funds in Australia. This would make it easier than ever for platforms like Finder to provide a service that helps consumers to choose a fund that is most suitable for them. Product reference data was the first thing made available under CDR for banking and we would advocate for a similar approach in superannuation. As with CDR for other sectors, we would be happy to assist the Data Standards Body with creating a format for this product reference data that maximises the utility of the dataset.

Reduce inconsistency with how super funds present their fees
Currently, the way each super fund presents its fees is inconsistent and complicated. Some funds present the admin fee as an annual cost in dollar terms, some present the fee as a weekly cost and some present the admin fee as an annual percentage of the account balance. In addition, some funds will charge a percentage-based annual investment fee, while others might not charge an investment fee but might charge a higher indirect cost ratio (ICR) fee. On top of this, funds change their fees regularly.

As a result, it's currently difficult for consumers to compare the true cost of one fund against another. By including superannuation in the CDR, platforms like Finder will be able to access a consistent API from funds with accurate and up-to-date information on the fees they charge. We can use this fee information to build engines and tools that convert the different dollar figure and percentage-based fees into one annual cost, so consumers can more easily compare.

Improve understanding of insurance cover provided by super funds
It can be difficult for consumers to understand how much they're paying for their automatic insurance cover within their super, and the value of that cover. This information is often buried in the fund's PDS and, like the fees, is presented in a variety of ways from fund to fund.

Being able to access the costs of insurance and the amount of cover via an API from each fund will enable us to include this detail in our superannuation comparison engines to help consumers understand the value of the included insurance. Another benefit is helping consumers compare this with other insurance options outside of superannuation.

Longer term, we would like to see CDR for superannuation make it easier than ever for Australians to move and consolidate their superannuation to the fund or funds that are most suitable for them. Making this as simple as possible will likely require the "write-access" being made available as discussed earlier in issue one.

Issue 3: ​Introducing Consumer Data Right to the market for car insurance

Finder would also like to see Consumer Data Right introduced to the market for car insurance. We offer a popular ​car insurance comparison service​ on the Finder website but more can still be done to improve outcomes for Australians in this category. A useful reference point here is the Financial Conduct Authority (FCA) General Insurance market study​ from the UK released in October 2019. We point you towards the ​International Comparisons annex​ of the study which makes the following points:

• Market concentration for motor insurance is much higher in Australia than it is in the UK. In the UK, the five biggest insurers make up 57% of the market compared to Australia where the four biggest insurers make up over 70% of the market.
• The Australian Government Productivity Commission (​Section 14.3​) has expressed concerns about high market concentration in the motor insurance market.
• The ACCC also highlighted to the FCA that many large insurers in Australia are reluctant to engage with price comparison websites due to their ability to drive down prices. In contrast, the UK market has a relatively high proportion of policies sold through price comparison websites.

When it comes to the cost of car insurance for consumers, the average comprehensive car insurance premium in the UK has reduced by 18% from Q1 2017 to Q3 2019 according to figures from the MoneySuperMarket ​Car Insurance UK Price Index​. In contrast, there has been a steady increase in the average comprehensive car insurance premium in Australia in the same period according to indexed-figures from the ​Insurance Council of Australia​.

Finder believes that introducing CDR in the car insurance market will improve outcomes for consumers. We advocate for a similar approach to what we have suggested for superannuation – a quick win for improved competition coming from making product reference data publically available in a machine-readable format in relation to motor insurance products. This would allow comparison services like Finder to show customers accurate and up-to-date information on price, coverage and features for motor insurance products in Australia. As with CDR for other sectors, we would be happy to assist the Data Standards Body with creating a format for this product reference data that maximises the utility of the dataset.