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 (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.