Senator accuses banks of acting 'like a cartel' in denying service to rival businesses
A Liberal senator has accused Australia’s big banks of acting “like a cartel” in denying services to tech-savvy rival businesses, as regulators probe an issue known as “de-banking.”
During a speech at an industry event last week, Senator Andrew Bragg said it was vital for banks to deal fairly with fintech competitors, especially as the government tries to develop the local cryptocurrency sector, according to a report by The Sydney Morning Herald.
In “de-banking,” fintechs that compete with banks are denied core banking services due to regulatory concerns. The issue of de-banking has been a hot one recently as Treasurer Josh Frydenberg announced major changes to payments regulation. The issue was also raised in an inquiry chaired by Bragg earlier this year, according to the Herald.
As part of the changes announced by Frydenberg, the Council of Financial Regulators has been asked to report on de-banking practices by the middle of 2022. In his speech last week, Bragg said the topic of de-banking was “very distressing.”
“The reality is that in many cases the major financial institutions have acted like a cartel,” Bragg said. “They have sought to ensure that fat margins on things like remittances and international cash transfers were protected. People have been de-banked, and businesses have been de-banked, for very soft reasons.”
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Banks have defended themselves by saying clients could be de-banked due to concerns about risk, including their management of financial crime risk, and the bank’s need to make a return on the banking relationship, the Herald reported. However, AUSTRAC warned banks last month against wholesale de-banking of fintechs, saying that the practice could have a significant negative impact.
Bragg said that banks shouldn’t be forced to do business with customers they don’t want to, but stressed that banks had a vital role to play in developing Australia’s fintechs.
“I don’t want to see banks forced to bank a customer that they don’t want, but we can’t have a situation where banks are routinely de-banking their competition – which is stymieing innovation and undermining choice and competition,” Bragg said. “After all, you can’t be a crypto hub if you can’t get a bank account.”
