February Fintech Roundup: The Open Banking Review and Fintech lending to SMEs

February Fintech Roundup: The Open Banking Review and Fintech lending to SMEs

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February Fintech Roundup: The Open Banking Review and Fintech lending to SMEs. In February we saw the release of two reports that could have a significant impact on financial technology (fintech) in Australia. The first is the final report of the ‘Open Banking Review’ which is currently open for public consultation. The second is a collaborative report from the Australian Small Business and Family Enterprise Ombudsman (ASBFEO), FinTech Australia and the BankDoctor into fintech lending to small and medium-sized enterprises (SMEs).

Today we address the key impacts these reports could have on fintech businesses (fintechs).

The Open Banking Review and Fintech lending

Photo by Fabrizio Verrecchia on Unsplash

By Dr Drew Donnelly, Compliance Quarter. 

Open Banking Review: Final Report

In February 2018, the final report of the Open Banking Review was released for consultation (https://treasury.gov.au/consultation/c2018-t247313/).  The report recommends that all authorised deposit-taking institutions (ADIs) must implement Application Programming Interfaces (APIs) allowing customers to share their transaction data with the third parties that they choose.

There is a range of matters in the report that will impact on fintechs, but the more significant ones are:

  • Eligibility for fintechs to become accredited to receive transaction data. This will be crucial for fintechs that trade in financial products in assessing the creditworthiness of customers;
  • Fintech involvement in the process of developing APIs for transaction data.

All the recommendations contained in the report are being consulted on and submissions can be made to data@treasury.gov.au by 23 March 2018.

Report on Fintech lending to small and medium-sized enterprises (SMES)

This wide-ranging report (the Report) into the current state-of-play for fintech lending to SMEs, released on February 27, is based on an in-depth survey of fintech lenders (fintechs) to SMEs and deliberations of an industry working group (see https://fintechaustralia.org.au/fintech-business-lenders-move-to-increase-transparency/). The report discusses a range of challenges for the sector with solutions in various stages of development:

  • Compliance with unfair contract terms provisions of the Australian Consumer Law (ACL). Analysis of survey results showed that lenders were aware of their obligation to comply with this law and have been taking steps to comply. The fintech lending industry has committed to working with ASIC and the ASBFEO to review contracts in order to ensure compliance across the industry (the Report, p32).
  • Glossary of lending terms. This is provided as a schedule to the report with the intention of standardising certain terms across the industry. It has been reported that, as fintechs can use different names for the fees they charge, there has been confusion for SMEs attempting to make comparisons between products (the Report, p41).
  • Dispute resolution. It is not currently a requirement for fintech lenders to SMEs to be a member of an external dispute resolution service (unless they are otherwise required to do so, such as when they hold a credit license). This makes it all the more important that fintech lenders have robust internal dispute resolution processes in place (the Report, p41).
  • Comparison. Currently, there are inconsistencies in the comparison tools and metrics used to compare different fintech lending products. Industry participants aim to implement a standardised approach for comparing unsecured fintech business loan products by June 2018 (the Report, p42).
  • Simple loan contract summaries. It is proposed that transparency and disclosure would be aided by a simple loan contract summary page that summarises key industry-agreed rates, fees and costs. Fintechs have agreed to try and resolve what information should be included as part of a standardised simple loan contract summary for unsecured small business loans (the Report, p42).
  • Code of Conduct. The industry working group has committed to developing (after consultation) a Code of Conduct to cover fintech lending for unsecured business loans (the Report, p42). This code will:
    • outline best practice principles;
    • set out legitimate customer expectations;
    • prescribe the comparative measures to be used; and
    • be expanded upon incrementally to include the full range of financial products.

Keep an eye on our website or provide your email in the popup for more curated analysis and content regarding the banking, financial and fintech sectors in Australia. Alternatively, contact us directly by clicking here.

Free Webinars on during the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services

Every Tuesday at 2pm (AEST/Sydney time) we will be running a free webinar to look at the last week’s developments from the Royal Commission. You can signup for our first in the series by clicking here.

Embedded Network Managers in Queensland: What’s the Deal?

Embedded Network Managers in Queensland: What’s the Deal?

AU Energy Compliance

Embedded Network Managers in Queensland: What’s the Deal? In a previous post, we looked at the Electricity and Other Legislation (Batteries and Premium Feed-in Tariff) Amendment Bill 2018 (the ‘Bill’). Today we want to update you on the progress of the Bill and answer the key question: Do consumers in QLD have power of choice?

Embedded Network Managers in Queensland

Photo by Samuel Scrimshaw on Unsplash

By Connor James, Compliance Quarter. 

In our previous post, we discussed the Bill and noted that:

The accepted view is that the effect of this provision (section 23 (2)) prevents residents in embedded networks from fitting the definition of ‘customer’. Therefore, the current law leaves it unclear as to whether embedded network customers in Queensland have the power to change to a retailer of their choice under the National Electricity Law.

Section 23 (2) states:

“[A] receiver [of electricity] is only a customer if the receiver’s premises has an electrical installation that, to the reasonable satisfaction of the distribution entity whose distribution area includes the premises, is capable of receiving supply directly from a distribution entity’s supply network”.

The Bill proposes the removal of s 23(2) from the Act, leaving no room for argument that Queensland embedded network residents are not ‘customers’ for the purposes of the National Law. Provided that the Bill is passed, this will remove any doubt about the ability of embedded network customers in Queensland to switch to their desired retailer.

The above view is supported by the explanatory note which states that an objective of the Bill is to “enable the effective implementation of a new national regulatory framework for retail competition in embedded electricity networks which commenced on 1 December 2017.” and further “amendments to Queensland legislation are required to avoid any conflict with the implementation of this major national reform in Queensland.

The Bill is currently being considered by the State Development, Natural Resources and Agricultural Industry Development Committee. The Committee is due to report back to parliament next week. 

The view of the Department and the AER

Since the publication of our prior post, the QLD Department of Natural Resources, Mines and Energy has released a number of factsheets on embedded networks. The factsheets indicate that the obligation to appoint an embedded network manager is in effect in QLD.

Also of relevance, is the AER’s website tool that helps determine when an embedded network manager needs to be appointed. It appears that this tool was updated to specifically reference the need in SE QLD as well as other in other states that have adopted the National Energy Consumer Framework.

Obviously, it is in the interest of the department to take this interpretation of the legislation. They wouldn’t want to be seen as the only NECF State restricting the rights of their residents to choose a retailer.

So, is an ENM required or Not?

So, do QLD consumers have power of choice (POC) and should embedded networks in QLD be appointing an Embedded Network Manager.

It is our view that Section 23(2) of the QLD Electricity Act may be read as conflicting with the POC reforms, however, the view of the Department of Natural Resources, Mines and Energy and AER is clearly that POC exists in QLD.

Consequently, embedded network operators in QLD should ensure that they appoint an Embedded Network Manager before the expiry of the transitional compliance period (i.e. Before 31 March 2018).

Embedded Network Managers in Queensland

If you would like assistance in understanding the obligations, appointing an Embedded Network Manager contact me today via email by clicking here.

New Registration Exemption Guideline released

AU Energy Compliance

Registration Exemption Guideline

By Anne Wardell, Compliance Quarter. 

The Australian Energy Regulator (AER) has released an updated Electricity Service Provider – Registration Exemption Guideline Version 6 March 2018 (new Guideline).

The new Registration Exemption Guideline commenced on 1 March 2018 and introduces two new exemption classes for small and large Dedicated Connection Assets. Other changes address associated issues related to the connection of generation assets to exempt networks; and harmonise the Network Exemption Guideline’s dispute resolution and ombudsman access provisions with those proposed for the Retail Exempt Selling Guideline.

The main impetus for the changes to the new Guideline was the release by the Australian Energy Market Commission (AEMC) of the Transmission Connection and Planning Arrangements Rule Determination. That rule required the AER to amend the existing Registration Exemption Guideline to give effect to the new rule.

The AER elected to include some other changes as well as the ones required for the new AEMC Determination. The AER has also released its Reasons for Decision – Amended Network Exemption Guideline – Version 6 (Reasons) which discusses the changes and provides details of the consultation process.

At page 8 of the Reasons, the AER divide the topics covered by the Guideline review into the following three broad categories:

  • Dedicated Connection Assets (Transmission Connection and Planning Arrangements Rule Change);
  • Generator connections; and
  • Protections for energy consumers.

The Reasons provide the following summary of the changes which have been made.

Registration Exemption Guideline Registration Exemption Guideline

Should you wish to ask questions or get additional information please don’t hesitate to contact the regulatory experts at Compliance Quarter by clicking here.