Australia’s banking sector recently ticked off an important date in its calendar. The date of 1 July 2021 marked one year into the country’s Consumer Data Right (CDR).
According to the Australian Competition and Consumer Commission (ACCC), CDR “will give consumers greater access to and control over their data and will improve consumers’ ability to compare and switch between products and services”.
The banking sector has been the first to adopt CDR rules in Australia, with the energy sector to follow and then telecoms thereafter.
Jamie Leach, founder of Open Data Australia and chapter lead ANZ at the Financial Data and Technology Association, says: “That first birthday marks 12 months since the first banks were mandated to share data.
“So, when we’re saying we’re 12 months in, it’s not 12 months of development, it’s 12 months of being live.”
Many of those in the industry were hopeful that the date would kickstart data sharing more widely, given commonly-held concerns about the pace at which some banks and other organisations were moving to comply.
Prior to 1 July this year, 12 data recipients had been accredited, with just six of those classed as active, including the ‘big four’ Australian banks and Regional Australia Bank.
“It feels like Australia is poised to start utilising Open Banking, we’re just not quite there yet,” Leach adds.
Saas platform Frollo was the first Australian fintech to become an accredited data recipient, when it applied to join the ACCC Open Banking trial alongside nine other fintechs two years ago.
Piet van der Boer, head of marketing at Frollo, says: “It took a lot of commitment and investment to make it through, but we always knew it would be worth it. We helped test the ‘big four’ banks extensively, while building our own data recipient technology and doing the work required for accreditation, such as an ISO27001 certification.”
He adds: “The CDR is a monumental change in how Australians are able to control and share their data. Starting with finance (Open Banking), the depth and breadth of data available for consumers to share is unparalleled.
“We always expected it to take about five years before Open Banking is truly embedded in the Australian economy.”
However, he found it “a bit disappointing” that coming up to the 1 July deadline, just 12 data recipients had been accredited.
“Open Banking would have been further ahead if more data recipients had taken up the responsibility to launch a use case in the market and share the load of testing and improving the APIs,” says van der Boer.
Hurdles to overcome
So, what exactly has been holding the industry back?
Mark Perry, chief customer officer at CDR compliance provider Biza, believes that on the data holder side, there are several reasons for banks not making the deadline on time: “Lack of understanding of the effort required to develop/deploy compliant CDR solutions, lack of understanding of the CDR-specific security requirements that would mandate changes to their network infrastructure or hosting environment, and being let down by solution providers who have underestimated the CDR requirements themselves.”
Perry continues: “Prospective data recipients have been held back by the complexity and cost of meeting current regulatory requirements in some cases, although the ACCC has introduced a plan to add less complex tiers of accreditation in their case, which hopefully will increase the rate of new participants entering the ecosystem.”
Since the 1 July has been and gone, there has been progress though.
According to Frollo’s ‘Open Banking Data Holder tracker’, as of 4 August there were 34 live data holders and nine active data holders.
As open payments gateway Volt’s chief data officer Tony Ohlsson points out: “Open Banking really needs to have the majority of banks in the system before the companies that use the data – called data recipients in Australia – can get meaningful benefits.”
He adds: “In Australia, Open Banking is, so far, passive information-based, meaning it’s only for electronic data sharing. There are discussions underway to add active functions – like payments capabilities – which we believe will help Open Banking become more useful in the future.”
Leach agrees that while she is seeing more accredited data recipients register, they “can’t really do anything until more banks come onboard and the data really starts to flow”.
“If step one is the banks, step two is the accredited data recipients, then step three has to be the use cases ready to go live to get the public to start using it,” she says.
What’s in it for the consumer?
The ACCC states that CDR, in encouraging competition between service providers, will lead “not only to better prices for customers but also more innovative products and services”.
As is to be expected, awareness of Open Banking and the CDR among Australian consumers is fairly low at the moment, but this is likely to grow in line with the number of use cases.
Although, some feel that ultimately consumer awareness can remain low.
“My firm belief is that consumers need not know much about the CDR or open banking at all, except that it is approved and regulated by the federal government,” says Perry.
He likens the CDR to plumbing – “we all know it’s there and that there are standards for both the components that make up the system and for the people who work on the system. Consumers also know that there are penalties for not following those standards, which gives them trust and confidence in the system,” he adds.
The ACCC’s involvement in CDR implementation should also provide consumers with reassurance.
Van der Boer explains: “Our own research shows that consumers have very low awareness of the Consumer Data Right, but it also shows awareness is not the most important thing. It’s all about building use cases that deliver value to consumers, within a trusted framework where consumers are in control of their data.
“We think one of the biggest opportunities for Open Banking will be in improving the mortgage lending process. There are a lot of inefficiencies in the process that Open Banking can help solve, resulting in a better customer experience, lower cost and a better informed lending decision.”
Volt’s Ohlsson says that companies will eventually use Open Banking for credit applications and loan affordability and then, eventually, the ability to transact and make payments.
“As these use cases roll out and more banks join in, it will get to a point where Open Banking plays a meaningful role for consumers in their everyday financial transactions,” he adds. “This may take some time, but the benefits will be significant for both consumers and banks alike.”