Peter Drennan, MD Qi Insights
The usefulness of the Reserve Bank’s disclosure framework for reporting bank outages has come under fire again, with payments experts questioning whether the dataset is an accurate snapshot of the real world experience of digital banking users.
The latest disclosures from the major banks on Monday appear to indicate that the availability of electronic and digital platforms improved sharply in the March quarter, with ANZ and NAB reporting big falls in time lost to outages.
According to the disclosures, ANZ’s total time lost to outages more than halved to 13 hours in the March quarter from 28 hours in the three months to the end of December.
Total outage time at NAB fell to six and a half hours in the March quarter from more than 14 hours in the previous period.
Service time lost at CBA fell by 15 minutes to five and a half hours.
According to the disclosures lodged with the RBA, Westpac was the only major bank to encounter more outage problems in the March quarter after service hours lost blew out to more than 20 hours compared to only 5.2 hours in the December quarter.
However, the accuracy of the reported outage data is questionable and in no way captures the disruptions to banking services caused by the record-breaking floods that paralysed regional parts of Queensland and NSW over a 50-day period from the middle of January.
The intensity of the floods meant that telecommunications and broadband services were frozen for days or weeks in many locations across both states.
The protracted seizure of telco infrastructure dislocated the delivery banking services through mobile, point of sale and internet platforms.
As a result, regional economies such as Lismore and Ballina in NSW and the Lockyer Valley in Queensland were forced to rely on cash as the main method of exchange as banks and telcos struggled for weeks to restore their services.
It is a matter of public record that these prolonged disruptions denied hundreds of thousands of people access to basic electronic banking services at different times.
But the data reported by the banks to the RBA offer no visibility into customer problems even though they were widely reported throughout February and March.
One of the aims of the service availability disclosure regime negotiated between the banks and the RBA was to record systemic outages caused by natural disasters or other factors beyond the control of financial institutions.
But the methodology they adopted seems useless for meeting the task of reporting any systemic event occurring outside of the country’s seven largest population centres.
Under the reporting arrangements, banks are only required to disclose incidents that affect at least ten per cent of their customers for 30 minutes or more.
The service outages that occurred in places like Gympie and Lismore dragged on for months and so they met the second criterion, but they were not reportable, presumably because they didn’t affect millions of customers.
Only one of the major banks – Westpac – attributed part of its service time lost to outages in the March quarter to natural disasters or other external causes such as telco network breakdowns.
Westpac attributes about six hours of outage time in the latest reporting period to external factors beyond its control.
The other major banks reported no outage time attributable to such causes even though they openly disclosed to reporters (including this author) in February and March details of systemic interruptions to digital and electronic service delivery in different parts of Queensland and New South Wales.
The problem with the service availability data is that over time it has a high probability of distorting the lived experience of banking outages in regional Australia.
As a dataset, the service availability disclosures are misleading because they are prone to understating the performance of digital banking services outside of major cities.
That’s a pretty big flaw in the dataset given that one of the RBA’s stated regulatory priorities is to monitor and help preserve access to banking services in rural and remote parts of the country.
Payments experts yesterday raised concerns about the adequacy of the existing methodology.
Peter Drennan, the managing director of Qi Insights, a research firm that tracks outage data, says the data collection methodology in its current form is unlikely to capture protracted service failures in regional and rural areas.
Drennan said that the definition of a ‘significant outage’ for automated tellers under the reporting framework requires at least ten per cent of the provider’s national ATM fleet to be affected or the outage to affect a major geographical area - an entire mainland capital city metropolitan area, or fifty per cent of ATMs in a state’s non-metropolitan area.
CBA, which has 180 ATMs outside major cities in NSW, would only have to disclose an outage affecting regional ATM users in the state only if half of the machines were impacted.
“That means a natural disaster like that experienced in Northern NSW would need to affect ninety or more CBA ATMs before it would need to be reported,” Drennan said.
“Natural disasters that impact specific cities or even regions are not likely to have an impact on this many ATMs given that ATMs are limited to one to five in each regional location.”