Govt targets bank account portability

Govt targets bank account portability

Summary: Bank customers would have the option of moving their deposit accounts and mortgages while retaining their account number under broad financial reforms, announced Treasurer Wayne Swan yesterday.

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Bank customers could have the option in the future of moving their deposit accounts and mortgages to different banks while retaining their account number under broad financial reforms, announced Treasurer Wayne Swan yesterday.

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"Deposit account number portability could ultimately provide consumers with a personalised, transferable account number to which all their direct credits and debits attach, and which moves with them when they switch," policy documents said.

Treasurer Wayne Swan announced that Reserve Bank Governor Bernie Fraser would conduct a feasibility study into the appropriateness of the account number portability system and into a timeline for delivery.

Fraser is set to consult the Reserve Bank itself, as well as big commercial banks, smaller credit unions and financial services customers to determine the issues the system faces in a view to implementation.

According to policy documents, 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.

The policy documents also highlighted the potential need for a Central Account Registry to track registered banking details and supervise movements.

Fraser is expected to report back to the government with his findings on 30 June 2011.

The account portability reforms are designed to increase competition in the Australian banking sector, with policy documents accusing the big banks of exploiting customers by making it a long and expensive process to move institutions.

The Competitive and Sustainable Banking System Reform contains a swathe of regulatory overhauls to help smaller banks compete with the bigger institutions, and strives to make banking fairer for consumers.

Caution required

Analyst firm Datamonitor today said that the new account number portability system was great for customers, but required previously absent industry-wide standardisation. The firm also said that it may involve prohibitively high transformation cost during the implementation process.

However, the benefits are there for the taking, according to Datamonitor.

"Account number portability may address many issues that have been discussed in the past which becomes the barriers for consumers to switch. This means that consumers can take their bank account number to other banks without changing their direct debit arrangement," said Harry Senlitonga, senior analyst with Datamonitor.

iTNews.com.au reported today that National Australia Bank head Cameron Clyne urged a rethink on the proposed account portability plan, saying that the government should consider other options.

Before a Senate Committee on banking reforms today, Clyne reportedly said that there may be other technological options that deliver similar outcomes rather than create a costly, complicated whole-of-industry system.

"For example, a user interface that allows customers to re-point a direct debit from one banking institution to another," Clyne suggested.

Clyne warned the government not to underestimate the complexity of core 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 told the committee.

Topics: Government, Banking, 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

5 comments
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  • Swan is really a goose.

    This will cost millions to implement, add security risks galore. Besides, the numbers belong to the issuer and form part of its accounting systems.

    So go jump
    Vasso Massonic
  • There are over 20 million mobile phone accounts in Australia and financial and statistical data is kept on every call, but Australia made the leap and created mobile number portability regulations to assist Australians move any of those numbers to whichever carrier they would like.

    Just like mobile phones, every bank account has a unique number derived from BSB + Account Number. That's how we can transfer money not only between accounts but between banks too. So yes, it's a big task, but nobody wants it to happen overnight, and just like the mobile phone industry did not collapse, neither will banks.

    As for Mr. Swan being a 'goose', I am sure he has far more knowledge and data at his disposal on the topic than you do, and unlike the 10 minutes of thought you probably gave your response, as in the article it will be over 6 months before the report on the feasibility is even completed.

    Personally I think it's a great idea to look into, and is a great warning to the financial sector that just like every other industry they need to answer to consumers. No industry should rely on complexity to call themselves untouchable.
    DamienJ
  • I think this is the right path they're heading down. It's a little hard to believe that we've going to move away from having the 4 big banks in Australia any time soon, and because of that competition is always going to be an issue.

    I'm not sure how feasible account number portability will be, after all the banks have a lot of power and the government doesn't have the guts to do anything to **** them off. Technical issue can be worked out, it's certainly no impossible, but probably impractical.

    What is of interest though is the reasoning behind why they are doing this, to allow for easier switching of financial institutions. Perhaps if they investigated some kind of automated notification system for direct debits, maybe credit card number portability, or even just a direct debit "forwarding" service, where you get notified each time a direct debit trys to take money out of your old account and has it automatically forwarded onto your new account (this mail re-direction via Aus Post).
    m00nh34d
  • "every bank account has a unique number derived from BSB + Account Number"
    BSB is unique to the bank, so is the Account Number. BSB needs to change so why single out the Account Number. Comparing a phone number to Confidential Financial Records, is a recipe for disaster. No question about that.
    Vasso Massonic
  • Account number portability is a waste of time. The comparison with mobile phone number portability is silly.

    For starters mobile phone number portability is not account portability. We all have both a phone number and an account number with our telecommunications providers and of course it's only the mobile phone number that is portable.

    With a mobile phone service the whole point of the service is to be able to connect one mobile number to another. If you change service providers that service breaks if people cannot connect to you. For bank accounts, on the other hand, the point is to store your money. The connection of accounts, such as your employee to your deposit account is important but not fundamental.

    From a consumer point of view account portability is as simple as being able to take all of your money out of the bank when it's required and put it in another bank. I cannot imaging a scenario where the highly technical bank account number portability solution would simplify this. Banks will not transfer your balance without going through the already established processes used to transfer funds between banks.

    Even if there was value in account number portability, wholesale and expensive standardisation of IT systems wouldn't be the solution. Mobile phone number standardisation has required very limited standardisation of infrastructure. I suspect that this is a feasibility / utility balance that is only achievable for good ideas.

    Lastly, if there was a real demand for a service that allowed you to use one number for all of your deposit and / or direct debit needs such a service could exist in dependently of banks. Something like a PayPal can / does provide this sort of feature.
    md032