Banks have ‘acted like a cartel’ in de-banking fintech clients: Andrew Bragg

Liberal senator Andrew Bragg says Australia’s major banks have acted like a cartel in denying their services to technology-based rivals, as regulators probe a problem known as “de-banking.”

In a speech at an industry event on Thursday, Senator Bragg underlined the importance of banks dealing fairly with fintech competitors, especially as the government tries to develop a budding local cryptocurrency sector.

“De-banking” is where fintechs that compete with banks are denied core banking services due to regulatory concerns. The issue has been on the agenda this week as Treasurer Josh Frydenberg announced sweeping changes to payments regulation. The issue was also highlighted in an inquiry chaired by Senator Bragg earlier this year.

As part of the changes announced by Mr Frydenberg, the Council of Financial Regulators has been asked to report to the Treasurer on de-banking practices by the middle of next year.

Having chaired the inquiry earlier this year and heard from fintech operators who had been de-banked, including some cryptocurrency firms, Senator Bragg on Thursday said the topic was “very distressing”.

‘The reality is that in many cases the major financial institutions have acted like a cartel.’

Liberal senator Andrew Bragg

“The reality is that in many cases the major financial institutions have acted like a cartel. They have sought to ensure that fat margins on things like remittances and international cash transfers were protected,” Senator Bragg said at the Australian Payments Network Summit.

“People have been de-banked, and businesses have been de-banked, for very soft reasons.“

In their defence, banks have said clients could be de-banked as a result of concerns about risk, including their management of financial crime risks, and the lenders’ need to make a return from a banking relationship.