4 March 2016

The Hon. Malcolm Turnbull,   MP

Prime Minister

Parliament House

Canberra ACT 2600

Dear Prime Minister,

Establishment of the FinTech Advisory Group

I write to congratulate the Australian Government on its decision to establish a FinTech Advisory Group, and I continue to welcome the increased focus on encouraging innovation in Australia, particularly in the FinTech sector.  As an active member of this community, and having recently launched our Acorns product in Australia, I have experienced first-hand the dramatic surge in activity in this industry, and I look forward to its continued growth.

That said, I strongly believe there is major issue that, if left unresolved, will prevent FinTech innovation and competition achieving its full potential in Australia.  

It is my contention there is lack of understanding and confusion in the public mind that they are no longer protected by Australian regulations, and that the liability protections under the terms and conditions on which they conduct their internet banking do not apply when they deal with FinTech start-ups such as ourselves.  This is not the case.

I am concerned and disappointed to see banks and other financial institutions seek to discourage users from engaging with FinTech by exacerbating the confusion and fear in this area.  

It should not fall upon the small start-ups to educate investors about their rights and obligations vis-à-vis their banks, and it should not fall upon small start-ups to monitor the information that is being disseminated to consumers by bank employees.

To explain this more specifically, Acorns is a micro investing / micro savings smartphone application. When a user signs up to the app, they provide Acorns (and its service provider Yodlee) with their bank account log-on details and password. There has been significant media commentary (both social and mainstream), including comments made by persons who purport to be bank employees, that by doing this, the user becomes liable for any unauthorised transactions. As you would expect, these type of comments are creating great consternation and discouraging users from engaging with FinTech companies, such as Acorns.

However, this commentary, and the stance taken by the purported bank employees, is wrong. It is clear under the ePayments Code (Code) (which all major Australian banks have subscribed to) that the user will not be liable for any unauthorised transactions because:

(a)             the user expressly appoints Acorns and Yodlee to collect information on the user’s behalf only (i.e. Acorns and Yodlee have “read only” access to the user’s bank account. They cannot effect transactions); and

(b)             Acorns and Yodlee protect the data using encryption and bank standard security measures to keep it safe.

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 would urge the FinTech Advisory Group and ASIC to consider this issue, given their mandate to encourage FinTech innovation, while reducing barriers and ensuring that these barriers are not (mis)used by incumbent players to discourage competition. Unless this issue is resolved, I believe it will stunt the development of FinTech, an integral part of the Innovation strategy recently articulated by you.

Please be aware that we will release a copy of this letter to our users (of which there are over 50,000) and to the media at large.

Should you wish to discuss this matter further or if you have any questions or comments, please contact me on 1300 954 678.

Yours faithfully

 George  Lucas

Managing Director

Acorns Grow Australia  Limited