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Regulators have given their blessing to 'screen scraping' – the controversial method fintechs are using to fight the big banks

Jack Derwin
  • Australia's neobanks and fintechs are using a technique known as 'screen scraping' to help get a picture of their customers' financial position.
  • Some of the big banks have been warning customers from allowing such apps to access their data, noting they are putting themselves at risk.
  • While recognising the risks, the country's financial regulators have more or less signed off on the practice, saying it's the best option available until open banking is introduced in July.
  • Visit Business Insider Australia’s homepage for more stories.

In a perfect world, Australians would be able to switch banks or lenders with a click of a button.

Unfortunately, we don't yet live in that fantasy world, and moving your finances over to a competitor can be a headache at the best of times. Instead, Australian fintech, like neobanks 86400, in a bid to compete with engorged incumbents, have had to resort to a practice known as 'screen scraping' to move your data across. Effectively, it means you provide your banking username and password to a fintech, and it logs in and absorbs the data within for use within its own service. It's a messy, but effective, solution.

"With screen scraping, we're basically logging on to your internet banking and taking a snapshot," 86400 CEO Robert Bell told Business Insider Australia. "We think it's very secure, but the big banks don't like it."

No kidding. While neobanks may still be in their infancy, they still threaten to bring something the big banks aren't particularly fond of: competition.

"I would argue that the loudest voices on this, in terms of anti-screen scraping, are those who have the most to lose from it, that is, the big banks because they don't want customers to see their data," Bell told a Senate committee in February when asked about the method and its opposition.

While Bell is diplomatic enough not to name names, the Commonwealth Bank has previously been identified as the most vocal opponent – perhaps fitting, given its status as the country's biggest bank, and thus literally the one with the most to lose.

Take the example of Raiz Invest, an app which allows Australians to invest their loose change in the share market. It had to reassure its customers back in November after CBA warned them the app posed a security risk.

"The only conclusion we can reach about CBA’s recent customer communications is that it’s deliberately designed to scare them away from other financial services companies, such as Raiz Invest, and as such is a poorly disguised attempt to protect its market share," CEO George Lucas told users at the time in an email seen by Business Insider Australia.

But while data scraping isn't ideal, Australia's financial regulators have now more or less given their blessing to it. Speaking at a different hearing late last week, ASIC confirmed for the first time that the practice is safe enough.

"There's no evidence of which we're aware of any consumer loss from screen scraping," ASIC commissioner Sean Hughes said.

"We're otherwise watching, but we haven't seen a need to act to date," ASIC financial services acting executive director Tim Gough confirmed, noting screen scraping's utility in assessing borrowers.

The ACCC also acknowledged that while it is not ideal, it's the best option consumers have at the moment.

"I think it's fair to say that screen scraping has inherent risks, even though there's no demonstrable consumer detriment being observed in the market." ACCC Consumer Data Right executive general manager Paul Franklin said. "I guess we're in a difficult situation [where] it's not a great solution but it might be the best available."

"Our role in consumer data right is to make sure that a better, safer alternative is available," he added.

Well, the fact is there is a better, safer alternative. Open banking allows one financial institution to seamlessly look at their customer's data at another institution. In theory, it should make it easier than ever to switch your accounts and open new ones, in turn getting banks and lenders to really compete for your business.

The reason we don't just use that instead of screen scrapping is because open banking hasn't been implemented yet. Why? Largely because big financial incumbents have dragged their feet. The open banking regime in a process of ironing out any kinks with the system and is due to finally be rolled out in July instead. Interestingly, it's one Australian fintech companies say it's one of the issues in most desperate need of government support. Certainly, Xinja and 86400 have both indicated open banking is superior to screen scraping.

The ACCC also skirted around the question of whether big banks warning customers off using other apps could be considered anti-competitive.

"The question is: is the bank doing something they've been asked to do for many years, which is to continually remind their customers about [the] security of their credentials, or are they overstepping a boundary?" Franklin told the Senate committee, without confirming the opinion of the ACCC.

Whether or not it is, neobanks are still managing to attract customers. Up, partnered with Bendigo Bank, told Business Insider Australia it had just surpassed 200,000 customers while the deposit books of its peers continue to swell.

Open banking, when it finally arrives, should only accelerate that growth.