It's all in the Productivity Commission

Amongst the plethora of reporting around the Banking Royal Commission (“RC”) in 2018, another substantive report battled to receive the media attention it deserved. In some ways, it was almost as if the conclusion of the RC was already written before the actual commission was held, almost prescient. It is well worth reading and can be found on the Productivity Commission website.

The report titled Competition in the Australian Financial System was prepared by the Australian Productivity Commission and covered the overall Financial market including banking, insurance and broking.

Amongst some of the conclusion are gems like this ..."

  • But the larger financial institutions, particularly but not only in banking, have the ability to exercise market power over their competitors and consumers.
  • Many of the highly profitable financial institutions have achieved that state with persistently opaque pricing; conflicted advice and remuneration arrangements; layers of public policy and regulatory requirements that support larger incumbents; and a lack of easily accessible information, inducing unaware customers to maintain loyalty to unsuitable products.

And please note that this report was produced 29 June 2018, almost before the RC really got interesting. So it cannot come as a surprise to customers of these institutions (and that pretty much means almost everybody) that you have been paying a high price for the artificial state of Financial Services for a long time. The unfortunate reality of this is that the average consumer is aware of this but the cost and inconvenience of changing is simply too great. Inertia…

Regulators should accelerate the ability of customers to switch providers  as easy as porting your mobile number. In theory that is. The practice may be utterly different,  and why I predict many institutions will drag their feet to fully embrace Open Banking. One of the culprits in delivering change is the complexity and inbuilt roadblocks that come from the KYC/AML process. It would be a gamechanger if the KYC/AML process could be radically simplified. It could be the turbo boost needed for genuine competition and consumers will have less hurdles in switching providers to achieve better outcomes. Level the playing field.