A feast of the epiphany – CBA’s risk appetite on crypto has changed the debanking game

The Commonwealth Bank of Australia announced last week that it will allow its customers to buy and sell cryptocurrency through its app, in the first move of its kind by a major Australian bank.

If Australia’s biggest bank is willing to offer unregulated products like crypto to their customers and take on board a high risk product, it raises questions around the debanking of regulated financial institutions in Australia, over ‘risk concerns.’

It can be said that some decisions by Australian banks to not bank or de-bank regulated fintechs, mean they have a larger risk appetite than they’ve let on for the past five years.

Tristan Dakin

Fintechs have been debanked en-masse over the past decade, much of this has been masked with the seemingly reasonable rhetoric of AML/CTF [anti-money laundering/counter-terrorism financing] compliance when in actuality the Australian fintechs who are denied banking services are often regulated to the same standards and by the same regulatory body as the bank itself.

The blanket debanking approach by many of Australia’s Big Four (as opposed to AUSTRAC’s suggestion for case by case risk based assessments) is discriminatory and delivers bad outcomes. It speaks loudly to the debanking concerns raised by Australia’s broader fintech sector as a practice that is anti-competitive on the part of traditional financial institutions.

According to AUSTRAC and the AFP, blanket debanking of the remittance sector has increased AML/CTF risks through pushing consumers towards Hawala and shadow banking. It also gives rise to serious questions about the misuse of market power by the big banks.

Restricted market access for innovative competitors is a market failure. This drives ineffective competition between smart, new innovative Payment Service Providers and incumbent banks who face little incentive to innovate and improve their services.
Anti-competitiveness results in higher costs along the entire value chain and a loss to consumers, in many cases migrant workers and those who are least likely to be able to afford the higher costs of financial services.

So the question that needs to be asked is, now that CBA has onboarded crypto despite their previous reluctance to trade in ‘risky’ payment sectors, what has changed, especially since the regulation hasn’t?

If CBA is happy to offer the highly unregulated crypto within their own app to millions of customers, a move which no doubt will have a domino effect in the sector, will we in effect see the end of debanking of regulated fintechs in Australia?

According to Matt Comyn’s recent comments on whether they’ll review their stance on banking the fintech sector in light of the crypto move, it sounds a lot like Commbank can’t and won’t: ”…we have to understand their business model and be comfortable and satisfied that the controls we have in place are sufficient to manage the risk we take on by banking that particular customer.”

CBA are hoping to feast-out on their move into crypto, we just hope given their growing risk appetite that they’ve saved room for seconds.