Australia’s government has kicked off a consultation inviting feedback on expanding its Consumer Data Right (CDR) to non-bank lending.
The CDR is a right for Australian consumers – individuals and businesses – to access data held about them. Going live on in July 2020, it signalled the first stage of open banking, with the country’s four major banks mandated to share access to consumer data for a range of personal accounts (when requested by the customer). CDR was extended to further deposit-taking institutions – smaller banks – one year later.
On 24 January this year, the government announced that the next priority area for CDR would be open finance, building on banking data that is already available. This will expand the number of financial products and services covered by CDR to include those in non-bank lending, merchant acquiring, general insurance and superannuation sectors.
Expansion to open finance will be delivered in phases and the ‘CDR Sectoral Assessment for the Open Finance sector – Non-Bank Lending’ consultation asks a series of questions as it looks to apply the CDR to businesses that offer consumers – both individual and business customers – loans, mortgages, personal finance, credit cards and other types of finance, but that do not hold a banking licence or accept deposits.
Consultation on merchant acquiring services (which enable merchants to process payments), general insurance and superannuation (organisational pensions, which ‘often represent an individual’s most significant personal asset’) will occur later in the year.
Non-bank lending ‘continues to grow’
‘Application of the CDR to open finance, including non-bank lending, can enhance the economic wellbeing of Australians by assisting individuals and businesses to switch to better-value deals that match their needs in products that fall within some of the most fundamental areas of one’s life – banking, insurance and superannuation,’ states the non-bank lending consultation document. ‘Providing more information about financial products reduces information asymmetries and can help consumers search for and compare a full set of financial products, and have greater confidence when dealing with the financial sector.’
The 23-page document states that non-bank lending in Australia ‘continues to grow in both balance-sheet size and range of products’, in many cases offering specialised products to consumer segments that are not prioritised by banks. It explains that it can be complex for people to differentiate between lending products offered by banks and non-banks to determine which best suits them.
‘Faced with complexity, many customers base their decisions on “rules of thumb” or shortcuts, such as choosing a well-known institution or an institution with which they have an existing banking arrangement,’ the consultation notes. ‘This can place non-banks at a competitive disadvantage, as consumers may be more likely to seek credit solutions from banks even if a better value deal is offered by a non-bank.’
The government is looking to receive input from non-bank lending providers about which datasets should fall within the CDR, as well as privacy and regulatory burden considerations.
The consultation will run until 12 April. Responses ‘will inform Treasury’s final report, which the minister will consider when deciding whether to designate non-bank lending services’.
CDR and ‘government-held consumer datasets’
Jessica Robinson, assistant secretary for CDR policy and engagement in Australia’s Treasury, said CDR “will be in rapid expansion over the coming years” during a Global Government Fintech webinar last week.
During the ‘Open Banking and Open Finance: What Role – And Benefits – For Governments?’ webinar (on 15 March) she highlighted that CDR currently only covers data-sharing but that Australia will soon amend legislation to provide for payment and account initiation, which, she said, would “substantially expand the functionality of the framework”. Energy and telecoms data are also being brought into the CDR. For the former sector, the launch of product information is scheduled for October, with consumer data (phase one) scheduled for November.
The government is also exploring the potential for the CDR to expand to government-held consumer datasets as part of the move into open finance data. ‘Expanding the CDR to complementary government-held datasets may also significantly enhance the user experience and utility of the CDR,’ the consultation document states.
Robinson touched on this during the webinar, describing it as an “important opportunity to look at the consumer through the through the lens of both public-sector data and private-sector data and, in particular, data held by government that can support, for instance, superannuation outcomes or relate to how consumers interact with their insurance products.”
Australia currently has 106 ‘data holders’ and 29 accredited ‘data recipients’ (of which 16 are active). Global Government Fintech reported these numbers, respectively, at 16 and 13, last July.
==> Global Government Fintech’s dedicated open banking / open finance section <==
‘Australian competition watchdog preps Consumer Data Right sandbox’ – our news story (5 January 2022) on the Australian Competition & Consumer Commission (ACCC)’s plan to set up a sandbox to help companies to develop and test solutions seeking to capitalise on the CDR
‘Australia’s open banking regime enters next phase’ – our news story (14 July 2021) on new CDR legislation coming into effect significantly extending the number of banks now expected to share basic consumer data
‘Open banking gets off to slow start in Australia’ – our news story (9 July 2020) on open banking becoming a reality in Australia after the CDR legislation went live
WATCH OUR WEBINAR
Global Government Fintech’s webinar, ‘Open Banking and Open Finance: What Role – And Benefits – For Governments?’, was held on 15 March 2022, with the support of knowledge partner Microsoft. You can watch the 75-minute webinar via our dedicated event page.