Account portability cost 'horrific': Westpac

Account portability cost 'horrific': Westpac

Summary: Westpac's IT tsar Bob McKinnon has joined the chorus of Australian banks railing against the government's proposed plan for account number portability, saying that implementing such a system would see financial institutions strip away the key elements holding the banking system together.

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Westpac's IT tsar Bob McKinnon has joined the chorus of Australian banks railing against the government's proposed plan for account number portability, saying that implementing such a system would see financial institutions strip away the key elements holding the banking system together.

Bob McKinnon

Bob McKinnon
(Credit: Westpac)

Following a Senate inquiry into competition in the banking industry in December, the government appointed former Reserve Bank governor Bernie Fraser to conduct a feasibility study into the appropriateness of an account number portability system to facilitate easier movement between institutions.

Fraser will analyse the technological limits surrounding portability, how the system can best preserve existing banking regulations and the benefits, costs and risks of such a system. Fraser is due to report back to the Senate with his findings by the end of the month.

Speaking at a CEDA event in Sydney today, McKinnon said that making accounts truly portable would require wholly unique account numbers, which he said would mean the abolition of the BSB (Bank State Branch) numbering system.

"An account number is unique because it is preceded by a BSB number. In order to have portable accounts, we need unique account numbers, and in order to do that, we need to dismantle the current basis by which number accounts, being the BSB system. That system is built into the DNA of the technology of every bank," McKinnon said.

The Westpac CIO said that while dismantling the BSB system and making accounts portable is achievable, it is not without significant costs.

"You could certainly solve the problem [of account number portability] but at an horrific cost. Now you have to ask yourself a question: does the value you bring from doing this justify the horrific cost? I can tell you, it would be an horrific cost.

"The UK had set off on this journey, and my recollection is, after truly understanding the problem and truly understanding the cost and the benefits they would get out of it, they abandoned the process," he said.

The Senate committee into banking competition saw other banks throw in their two cents on account portability, with Bendigo Bank managing director saying that he didn't feel the system was necessary to improve competition. National Australia Bank (NAB) CEO Cameron Clyne warned the inquiry not to go messing with complex banking systems.

"I wouldn't underestimate the complexity of the infrastructure environment that a lot of banks are dealing with. They were built up over a long period of time," he said.

Topics: CXO, Banking, Government, Government AU

Luke Hopewell

About Luke Hopewell

A fresh recruit onto the tech journalism battlefield, Luke Hopewell is eager to see some action. After a tour of duty in the belly of the Telstra beast, he is keen to report big stories on the enterprise beat. Drawing on past experience in radio, print and magazine, he plans to ask all the tough questions you want answered.

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Talkback

11 comments
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  • Perhaps their database needs a new table.
    Or a shadow number?
    gikku-2ce6c
  • Perhaps customers should just switch banks with a 3rd party aid and the governement just pays the 3rd party.
    Simple.
    Stuff the banks.
    They make heaps of money from money and you expect people to believe it when they cry poor or a change in process?
    Are you serious?
    cootified
  • with less than 27 million of us in the country its a easy process. Time the banks were reminded they dont run the country.
    Hideous62
  • Hey amckern,
    Sorry about the error. I've amended the article.

    Ta,
    Luke Hopewell
    Journalist | ZDNet Australia
    LHopewell
  • McKinnon says "such a system would see financial institutions strip away the key elements holding the banking system together"...

    ...and this is supposed to be a BAD thing?
    Doctor_Sardonicus
  • There afraid of the Profit Margins !
    jeff_syd
  • In other words account portability would mean that banks would have to be competitive for a change. Many stay with a bank not because of any sense of loyalty, but because there is too much time and mucking around required to change.
    xBeanie
  • This is ludicrous. The whole basis of computing in the banking system starts with the account number. All connections are based on it. The cost to uproot this & create a mobile base for the account number is obviously a want by someone who has absolutely no understanding of what the damages are.

    Security will be fundamentally undermined (we are talking about bank accounts here), links become slower because every basic link will become a dual link which also reduces security. Costs will escalate bcoz banks will have to increase their processing & they do that for nothing. Too dangerous...
    alfielee@...
  • Whatever we think of the banks (don't start me on that!), imposing this change will increase security risk by an appreciable amount and will cost a heap of money. Apparently it's all because some people are too lazy to record new account numbers when they change banks.

    Saying 'the banks are **** is quite right and might make us feel better, but let's have a reality check:
    One way or another, every cent of this costly and unneccessary change will come straight out of OUR pockets, not the banks'.
    gnome-8be8a
  • If ISP's (who are in a very competitive field themselves) can manage this with fast churn, I fail to see why banks could have a problem?
    Tinman_au
  • Come on people, while account number portability sounds like a simple idea the whole concept is stupid.

    Firstly, everyone who's ever had any form of account number (banking or otherwise) knows that each system is generally unique to an organisation. Therefore, every database system potentially uses it's own system and thus simply cannot adopt foreign account numbers that may either conflict with pre-existing customers or not fit within the formatting/system being used.

    Secondly, just what problem is this solving? Moving between institutions itself isn't difficult, and no matter how you do it you will still need to notify all those that deal with your banking details (loans, super, auto-payments etc) because your BSB has now changed. So retaining your account number for a perceived 'ease' is flawed as a secondary key element (the BSB) will always change by institution, thus defeating any other perceived benefit of retaining account numbers.

    No idea what the banking boffins are thinking. Forcing banks to adopt a common system (e.g. transportability) sounds more like another case of Big Brother rather than a solution to what is obviously a poorly perceived problem of account portability.
    Scott W-ef9ad