Source document: https://docs-lawep.s3.us-east-2.amazonaws.com/1697636055552.pdf (Australia)
19 January 2017 Senate Standing Committees on Economics Parliament House, Canberra, ACT, 2600 Dear Committee Member, Re: Consumer Protection in the banking, insurance and financial sector Thank you for the opportunity to make a submission to the Senate Standing Committee on Economics.
As managing director of Acorns Australia (Acorns), https://acornsau.com.au/ I believe the Committee’s review of the banks is timely and important - both for consumers of banking services and for the emerging FinTech sector (of which Acorns is at the forefront).
FinTechs have the potential to be a changing force in our economy by:    Providing important competition that will deliver better outcomes to consumers; Reducing the community’s reliance on the large banks for financial services; and Providing consumers with real options and choices, offering them services they actually want, in the process making banks more accountable to their customers.
Certainly this is the role Acorns envisages it can play in our economy – if Acorns has access to a level playing field with the banks.

Unfortunately this is something the banks are doing their best to prevent.

Background Before detailing how the banks are attempting to stifle Acorns in its infancy, I would like to provide some background on our company.
Following its official Australian launch in February 2016, Acorns has registered over 180,000 sign-ups, confirming this country’s appetite for FinTech innovation and financial services provided by non- bank aligned institutions.

In a nutshell, Acorns allows Australians, many for the first time, to get access to the share markets, in a simple and cost effective way, for an initial investment as little as $5.
Before Acorns, first-time investors were traditionally confronted by large fees, commissions and minimum investment sums of about $5000.

Significantly, the app’s success is being driven by young Australians (70% of downloads are aged 35 years Consumer protection in the banking, insurance and financial sectorSubmission 27 or younger), who, in the process, are discovering the benefits of saving and investing small amounts regularly as well as the educational value of the app (improving financial literacy).
Social Impact So, here’s the situation.

Australians, especially young Australians, have an appetite for FinTechs.

They look to FinTechs to simplify their lives and provide new services which are not currently available through traditional financial services companies.

FinTechs such as Acorns brings with it additional benefits for young Australians to learn about thrifty habits and increase their knowledge about how investment markets work – a hands-on lesson in financial literacy.
The banks, however, have wanted to stifle this competition due to our rapid growth and, in the process, deny Australians (especially young Australians) access to improved financial literacy and better saving habits.

Misconduct by banks How are they doing this?

It is my contention that the banks are deliberately creating confusion in the public mind about the security associated with FinTech start-ups such as Acorns.
It has been confirmed by ASIC that the messaging used by the banks is not in line with the current regulatory environment or the enormous changes in technology.
The banks’ messaging implies that the use of Acorns increases the risk of unauthorised access to a user’s bank account (which it simply wrong) and that Acorns’ customers no longer have the liability protections under the terms and conditions on which they conduct their internet banking (which is also factually incorrect and totally ignores the ePayment Code).
This is a deliberate campaign of misinformation; they are actively seeking to discourage users from engaging with Acorns by exacerbating the confusion and fear in this area.

One concrete example.

CBA recently targeted Acorns’ customers with an email implying the use of Acorns increased the risk of fraud on their accounts – this is misleading and is not supported by the evidence.

CBA’s email is not an isolated incident.


There has been significant media commentary (both social and mainstream), including comments made by people purporting to be bank employees, that Acorns’ customers are liable for any unauthorised Internet transactions if they sign up to Acorns.

Not surprisingly, these types of comments are creating a great deal of consternation and is discouraging users from engaging with Acorns.
Page 2 Consumer protection in the banking, insurance and financial sectorSubmission 27 Potential abuse of market powers by CBA In mid-October 2016 Acorns, became aware that CBA blocked Acorns from accessing customer data.

Acorns has permission from Acorns’ customer to access their own data through CBA’s online bank.

When this data access is blocked, it prevents CBA account holders from fully utilising the Acorns app and service.
Acorns believes that CBA was attempting to hinder and prevent Acorns from competing in the market.

Acorns believes that CBA’s action is anti-competitive and likely to constitute a misuse of market power by CBA.

ASIC, who was informed of these actions at the time has requested that they be allowed to inform the ACCC.

ASIC has since informed us that there are ongoing discussions with CBA regarding this matter.
The blocking of Acorns’ customers was eventually resolved, with CBA lifting the blockage after considerable noise and action from us.

However, for over 4 days CBA account holders were not able to use the full features of the Acorns app.

Due to the size of CBA, 30% of Acorns customers bank with CBA.

The data blockage impacted tens of thousands of Acorns customers.

Failure of current laws Current laws and regulatory framework In truth, this is misleading and deceptive.
Acorns’ customers are protected from any unauthorised internet transactions.

It is clear under the ePayments Code (Code which all major Australian banks have subscribed to and is regulated by ASIC) that the user will not be liable for any unauthorised transactions because: a) The user expressly appoints Acorns (and its service providers) to collect information on the user's behalf, acting only as an agent (i.e.

Acorns has "read only" access to the user's bank account.
Acorns cannot make any transactions); and b) Acorns (and its service providers) protect the data, at a reasonable level (usually higher than the customers), using encryption and bank standard security measures.

Consequently, the user does not breach the requirements of the Code, nor the terms and conditions of their bank contract and does not become liable for any and all unauthorised transactions.

I suspect most of Acorns’ customers have not read the ePayment Code or know it even exists.
Nor should they have to.

They should be allowed to invest using Acorns (or any other FinTech company) without having to worry about losing money in their bank accounts because their bank has spread fear and confusion through misleading and deceptive information.
Page 3 Consumer protection in the banking, insurance and financial sectorSubmission 27 Concrete Steps In my opinion, this committee can take three concrete steps to put an end to this type of behaviour by the banks and other large financial institutions:    Use its moral authority to let the banks and other large financial institutions know that they are behaving outside their Australian Financial Services Licence by providing misleading information (even when implied), are behaving in an unethical fashion and insist that they stop their scaremongering campaigns; Encourage the Federal Government to legislate the recommendations in the Financial System Inquiry as they relate to the ePayment Code.
This will confirm that FinTech services offered by Acorns and others are legitimate in every sense (and that customers' accounts are not at risk of unauthorised transactions merely because of signing up to Acorns (or other FinTech companies)).

Provide the regulator (ASIC) a mandate to actively encourage competition in the market.

In the UK, the Financial Services Authority (FSA) has a mandate to encourage competition in the market as well as to regulate it.
The UK has also mandated ‘Open Data’ access to bank data which the Australian banks have already publicly denounced.

Conclusion This issue has an impact, to a greater or lesser degree, on all FinTech start-ups.

In the case of Acorns, it has diverted our collective energies and significant business and legal resources from focussing solely on our business – to the detriment of our customers.
It has been of such concern that we have written to the Prime Minister, The Hon Malcolm Turnbull, and the Minister for Revenue and Financial Services Kelly O’Dwyer butsadly to little effect.

We have also communicated our concerns to ASIC.

I would have thought that a Government publicly espousing the benefits of FinTech start-ups would have been more receptive but perhaps this is a better forum to raise such issues.
FinTech in Australia is bringing financial services to the “mass affluent”: improving financial literacy;   services that consumers actually want;  providing competition, and  a fairer more stable financial system for all users.

However, unless the government addresses the anti-competitive behaviour adopted by the (government-mandated) bank oligopoly, this process will grind to a halt (to the significant detriment of the financial health and wellbeing of ordinary Australians).
I therefore ask this committee to give due weight to my submission and what it means to the financial future and well-being of all Australians.

All we want is a level playing field.

Page 4 Consumer protection in the banking, insurance and financial sectorSubmission 27 Yours Sincerely, Managing Director, Acorns Grow Australia Limited Page 5 Consumer protection in the banking, insurance and financial sectorSubmission 27