On 9 May 2018, the Australian government announced it will implement the recommendations of the recent Review into Open Banking by both creating a Consumer Data Right (CDR) within the banking sector and developing a data sharing framework to facilitate an open banking regime.
The CDR was first suggested to government by the Productivity Commission in 2016, and since then has been developed in the context of the banking industry as part of an economy-wide sector-by-sector roll-out. The CDR roll-out will commence with the banking sector before expanding to the energy and telecommunications sectors and then the economy more widely.
The CDR aims to give Australians greater control over their data by enabling the sharing of transaction, usage and product data with service competitors and for service price comparison purposes. The CDR will commence in the banking sector with “Open Banking” which is the term used to describe an environment in which consumers are free to authorize and direct their data to chosen banking service providers.
This development comes at a time when there is a worldwide regulatory trend to promote competition in the banking sector. For example, in the EU, Payment Services Directive 2 requires banks to make their customer data available to third parties with customer consent. This is regulated and secured via a standard set of software interfaces, which remove banks’ direct interface with customers in many online transactions. The advent of open banking in the EU has challenged banks to adapt and embrace new business models, and has created opportunities for tech companies to increase their direct processing of banking data in a secure way.
Implementation of the Open Banking regime in Australia will occur in phases from 1 July 2019. Australia’s four major banks must make available the following types of data within the following timeframes:
- credit and debit cards, deposit and transaction accounts by 1 July 2019,
- mortgages by 1 February 2020, and
- personal loans and all other products by 1 July 2020.
All other non-major banks will have an extra 12 months on these timelines to implement the Open Banking regime.
Open Banking is set to significantly alter the banking landscape in Australia. Businesses and government need to be fully aware of the implications of the new regime and adapt their processes whilst maintaining sufficient data privacy and security measures.
Further consultation on draft legislation, rules and technical standards necessary to facilitate the Open Banking regime is expected in the coming months.
Source & credit: www.lexology.com