The customer power move will be aimed at preventing what Treasurer Scott Morrison will today call “disappointing incidents” exposed by the Financial Services Royal Commission.
And the Government hopes the move will dilute the power of big banks by allowing more competitors into the market.
Mr Morrison is set to reveal measures urged by a Productivity Commission inquiry into Competition in the Australian Financial System.
“Power needs to be put back in the hands of the customer,” he will say in a speech today, prepared for the Australia British Chamber of Commerce in Sydney.
“Power to change their circumstances. Power to get a better deal on their mortgage, on their credit card, on their business loan. Power to change the system.”
The Government also wants more companies in the sector — “more players, more innovators, and a level field upon which to play”.
And it wants to do it without more layers of regulation on banks.
A prime objective will be to ensure bank customers can get more and better information to improve chances of making informed choices.
And this could involve sharing banking data with third parties who might offer better deals.
Mr Morrison argues this “shifts the paradigm” of financial institutions setting the rules and demanding customers adhere to their purposes.
It would mean customers “making the demands, setting the rules and forcing banks to react”.
It could also encourage a boost to competition as new players took fresh opportunities.
“Open banking will be a game-changer,” the Treasurer says.
“Granting third-party access to your data securely will also make the process of switching between banks less painful and help overcome the ‘hassle factor’.
“More choice, more competition and importantly, more power.”
The focus on customer rights and protection comes as the Government prepares to relaunch its bid to have big corporate tax cuts — including for banks — accepted by the Senate.
Further, it is pre-emoting an interim report by the royal commission into financial services at the end of next month which is certain to raise what Mr Morrison calls “disappointing episodes”.
The Government wants customers to enjoy protection “from some of the misconduct and predatory behaviour that has dogged our banks and institutions”.
Mr Morrison acknowledges the interim report probably won’t be flattering towards banks.
“And while there has been a rather large spotlight shining on the misconduct within our banks, culminating with the royal commission, we haven’t limited our focus to that,” he says in the speech.
Critically, the new measures are an alternative to ramping up regulation of the financial system.
“Regulation may have played a pivotal role in making our banking and financial system stronger, in a prudential sense. But it hasn’t necessarily made the customer any stronger,” Mr Morrison says.
“Too often we have also become willing participants in a game where the deck is stacked against us. Because you can almost guarantee it, the more passive a customer is, the worse deal they are going to get.”