Big bank market power under close watch by the ACCC

The Commonwealth Bank of Australia (CBA) earlier this month announced it was investing AU$50 million to take a share of two startups. It has taken a 23% shareholding in online shopping startup Little Birdie and a 25% stake in Amber, which provides subscription-based access to wholesale electricity prices.

Westpac, meanwhile, has partnered with buy-now, pay-later player Afterpay to offer white label services.

After previously stating he welcomed competition in the fintech space, just not for the sole benefit of filling the pockets of the nation's largest banks, Australian Competition and Consumer Commission (ACCC) chair Rod Sims has said he is closely monitoring the sector.

"The Commonwealth Bank is -- it's got probably 25% of the home loan market, it's obviously the biggest bank -- but in terms of what they're doing, there's a lot of other players in the market," Sims told Senate Estimates on Wednesday night.

"So certainly happy to keep an eye on it, but I think with all else going on in the market, it would be a bit early to call that market power. It's an interesting development, they're trying to match a range of other digital players [like] fintechs offering various services."

He said the ACCC almost sees it as an encouraging sign to improve the mix of economic activity.

"But I accept they're a big player and when big players do things like that, we have to monitor carefully," he added.

"The four of them have got enormous power. If they get behind something, that's fine, they all do the same thing."

On Westpac, Sims said it was similarly "fairly early days".

"It's part of all the rich developments that are going on, that we're monitoring very closely. And there are a number of white label services provided by various banks. Citibank, for example, provides white label credit card facilities," ACCC executive general manager of specialised enforcement and advocacy Marcus Bezzi added.

"In a sense, what Westpac is doing is a pro-competitive thing, entering into an activity that enables Afterpay to provide a full range of services than it currently does."

Bezzi said he saw this as a way for fintech to become a more viable competitor within the financial services market.

AFCA demands access to financial data to do its job

The Australian Financial Complaints Authority (AFCA) is finding it hard to uphold its duty of monitoring significant consumer detriment in the financial services space, mostly because the federal government has yet to give it data collection powers.

"There are a couple of areas where AFCA is data poor, and largely, it's because we don't have data collection powers," Australian Securities and Investments Commission (ASIC) deputy chair Karen Chester told Senate Estimates on Wednesday.

"Yes, we can go out and issue notices to entities, but to do it entity by entity … is a hugely resource-intensive task. It is timely [and] expensive."

Areas where AFCA lacks data, Chester said, are management investment schemes, which she called the "building blocks underpinning our entire super system".

"We do not have recurrent data collection rights there in insurances; because we work with APRA, they've got some data collection rights that we're able to leverage off. Super, again, we have to leverage off APRA," she explained.

The other area where the complaints authority has struggled is the non-bank sector of lending.

"There are so many different business models, we don't have data collection powers there. And we're in a world now where you can have a consumer who will have, say, dealings with the CBA, their debt situation may look fine, but you take into account buy-now, pay-later or a payday lender, consumer leasing of whitegoods -- we do not have a cumulative debt story," Chester explained.

"And that is fundamental for us to understand -- where is the tipping point for significant consumer detriment occurring?

"There's three or four areas where we simply do not have the data collection powers."

Chester said she would prefer timely access to the information so the agency is not "sopping up the spilt milk" after misconduct.

"That's base one. Base two on the climb to Everest is really us making sure that we've got the data capabilities and the capex … we've decided to reallocate money ourselves to make data capabilities a priority and we are doing that, but we are capex poor," she said.

"That's what we really need to be able to really deliver on what the Parliament expects, and the Senate expects of us, with the new powers that we've gratefully received."

Internally, Chester said the agency has made data a priority, reallocating funding it has to employ a chief data analytics officer and implement a data strategy.

"We're upskilling our lawyers, we're doing everything that we can do to help capability. [We're] ready to roll but we need the actual hard data, so we need powers to be able to do that," she said.

'Legit' crypto businesses should make themselves known

ASIC said it has seen an increase in cryptocurrency-related scams this year, which commissioner Cathie Armour labelled as quite dramatic.

"We have seen a rise in crypto investment scams over the first part of this year, and that's been both scams in Australia and coming into Australia, if you like, and it's been quite dramatic, the increase in that scam activity," she told senators.

Armour said ASIC has set up a taskforce to try and address the issue of scam activity as proactively as it can, but her advice for any new business foraying into cryptocurrency would be to reach out to the regulator before attention is drawn to it for any negative reason.

"I think one way that an innovative new business can distinguish themselves is actually to bring themselves into the regulatory perimeter, rather than operate," she said.

"If they're able to do that, because in some ways, that's probably a very good distinguishing factor for the business.

"I would encourage all crypto asset businesses to think about whether they can do that."

On how to actually prevent scams from reaching Australians, however, Armour said that was a policy question for government.

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