On August 1, 2019, the Consumer Data Right (CDR), an initiative introduced in November 2017, was passed by the Australian Parliament. This officially opens the door to Open Banking in Australia, which will allow customers the right to ask for their data to be shared with other parties they have chosen to trust.
According to the CDR mechanism, customers in Australia will now have access to their own financial data. They can ask for this data from their banks as needed without going through the complex paperwork currently needed. This data can in turn be provided to other service providers they trust, allowing them to easily switch loan providers and credit cards.
What has been achieved
As of now, the legislation has been passed by the Australian Parliament. The next step is for the ACCC (Australian Competition and Consumer Commission), the country’s financial watchdog, to establish the rules. They will be responsible for describing the principles, requirements and outcomes for the application of Open Banking and the CDR. Following the rules, the standards – defining the technical methods of implementing data transfers and other related elements – will be developed by the Data Standards Body.
What this means
As per the legislation, all Australian Authorised Deposit-taking Institutions (ADIs) must comply with Open Banking. These include banks, credit unions and building societies; however, other entities can also participate by seeking accreditation through the system. While the CDR will initially be applied to financial services, it will also eventually be enforced on the energy and telecom sectors.
What needs to be addressed
In order for this initiative to be successful, the customer will need to clearly understand the implications of Open Banking and how this would benefit them. Both the government and the industry would need to invest in ensuring that the open banking practices are applied quickly across the sector in an effective and secure manner.
Doing this would help instill and maintain consumer faith in the system, ensuring that early adopters have a markedly improved experience. Also, by clearly defining the benefits – service-based, product-based, pricing-based, or otherwise – that the consumer would enjoy as a result of this, they will quickly appreciate the impact that this would have on their lives.
What comes next
As part of the initial stage of the timeline, the four major banks have already made all generic product data available on all cards (credit and debit) and accounts (deposit and transaction). The next stages are staggered over the next two years:
- February 1, 2020: The four major banks will make CDR data available on not only cards and accounts as mentioned above, but also on mortgages.
- July 1, 2020: The four major banks will make CDR data available on all products; all other banks will CDR data available on cards and accounts
- February 1, 2021: The other banks will make CDR data available on mortgages.
- July 1, 2021: The other banks make CDR data available on all products.
As experts in the digital banking sector, Penser keeps close tabs on how the market is adapting, with special focus on the key players and the innovations in the industry. We act as advisors to a number of financial clients on their digital transformation journeys, as well as support them with due diligence and strategic planning services. Click here to contact us for more information.