Banking Review

Portability is possible, getting big four agreement a lot harder

OPINION

National Australia Bank chief Cameron Clyne looked a little nervous when asked about account portability at yesterday’s Senate grilling, as testimony got underway in the current inquiry into banking competition.

Given he had just moments before pointed out it’s the cost and time of finding and switching to an alternative bank that is the real issue at the heart of competition, it’s not surprising the big bank chief let the pressure show.

Asked about account portability, seen by many as the answer to easier switching, Clyne was quick to point out the complexity of the bank’s ageing infrastructure, which is currently being replaced at a cost of more than $1 billion, and the resulting difficulty of attempting to make account numbers truly portable.

Instead, he said, couldn’t we explore some options that aren’t quite as complex?

What Clyne wasn’t letting on was the major banks, through their jointly owned payments unit, BPAY, have been exploring a BPAY-based account portability option for almost three years.

It’s called Mambo (Me at My Bank Online), and would see individuals register for their own BPAY code, which consumers could then port from bank to bank without the need to re-establish direct debits or credits. It could also be used to enable online payments directly from an individual’s bank account.

After the banks invested millions in early scoping, Mambo was shelved in 2008, before being revived in 2009 in response to renewed pressure from the Reserve Bank for innovation in online payments, and in particular, online payment alternatives to the card brands Visa and MasterCard, which are seen by central banks the world over as having too much market power.

The Reserve Bank has a big stick to threaten the industry with – interchange fees. And every time that stick gets waved by the central bank, the industry moves quickly to make the right noises about its ongoing work on the Mambo scheme.

Westpac cites its “active participation” in Mambo in its submission to the Senate inquiry, calling it a “modular and flexible service that expands customer choice by creating a single online payment identity that can be transferred if a customer switches financial institution.”

Mentions of Mambo are noticeably absent from the submissions of the other major banks, despite it being a real answer to the issue of account portability.

Speculation is the banks aren’t quite seeing eye to eye on the final scope of project Mambo, with the two Melbourne banks particularly vocal on changes they want made to the original scoping document. BPAY is being tight-lipped on the project ahead of getting consensus.

Treasurer Wayne Swan could save Bernie Fraser the time exploring whether the clunky systems of our major banks can cope with account portability – the short answer is they can’t – by sending him over to have a chat about Mambo with the Reserve Bank’s Payment Systems Board.

After all, as the banks point out, almost two thirds of non-cash retail payments rely on card scheme numbers and other references developed by BPAY and PayPal, rather than on account numbers.

Let’s not see more taxpayer dollars wasted because the right hand doesn’t know what the left hand is doing.