Open banking has become a reality in Australia after the country’s Consumer Data Right (CDR) legislation went live on 1 July.
The country’s four major banks – ANZ, Commonwealth Bank, NAB and Westpac – are now obliged to share customers’ data when requested by citizens. Other deposit-taking institutions will join the CDR “over the coming year”, the Australian Competition & Consumer Commission (ACCC) said.
The aim of open banking is to boost competition by enabling third parties such as fintech companies to develop new apps and services.
Australia’s open banking era begins with just two third-party companies accredited to receive customer data from banks, with 39 more in the accreditation process. It gets underway after a six-month postponement to “allow additional implementation work and testing to be completed and better ensure necessary security and privacy protections operate effectively”.
Since the delay was announced, the coronavirus pandemic has struck. A Treasury spokesperson told Global Government Forum: “As the majority of the preparation for the July phase of the CDR had been already well progressed by the banks and government when the COVID-19 threat became significant, it has not been necessary to delay launching this infrastructure. Some minor functionality has been pushed back from July to later launch phases.”
COVID-19 had also made “some impact on the speed with which some fintechs will have CDR-driven products available to consumers”, the spokesperson told GGF. The government “is committed to ensuring that the CDR is open for business for fintechs as early as possible, to assist those businesses who are ready and eager to join,” he said.
‘Great potential’ to help COVID-19 recovery
The UK is significantly ahead of Australia in its open banking journey, with more than one million users and 69 listings on an ‘app store’ launched by the UK’s Open Banking Implementation Entity (OBIE). OBIE said its app store would help people access financial products “that will help them weather the COVID-19 crisis”.
The Australian Treasury spokesperson said that the CDR “has great potential” to be useful in helping individuals and small businesses recover from the negative impacts that COVID-19 has had on the economy. “Products available in the UK’s open banking regime show how data-sharing arrangements such as the CDR can assist businesses and individuals with financing and financial management. By launching the CDR without delay, these products will become more available and, in turn, will be able to help businesses recover and households minimise their borrowing and banking costs.”
The ACCC is consulting on draft rules related to third-parties operating within the CDR.
Robyn Chatwood, partner in the Melbourne office of global law firm Dentons, told Global Government Forum: “Open banking is off to a start albeit a slow one. This was somewhat expected – not just because the publicity surrounding the launch has been drowned out by COVID-19, but as the reform is so complex. It simply will take time to have an impact on the market as designed – not least because we need to have enough accredited data recipients to bring competition to the banking sector.”
She added that due to the pressure that the banking sector is under with COVID-19 and the impact it is expected to have on bank profitability “it is not a time for the government to be seen to be pushing too hard on measures that are designed to shift market share from the large four banks. Maximum co-operation from the largest players in the banking market with the pandemic response is what is most needed at this stage and that is where the short-term focus is”.
‘Early exploratory stage’ for possible government use
Open banking technology has the potential to improve public service delivery, for example with tax payments or assessing a citizen’s income and expenditure.
However, the CDR “could only be used by a government agency if the agency were to become an accredited data recipient and the consumer were to explicitly and voluntarily agree to the agency collecting its data for a specific purpose,” the Treasury spokesperson explained. “Though the CDR may provide a useful method for consumers to elect to share their data with government for service delivery purposes in the future, the CDR is not being considered as a method of increasing government access to consumer data. Any considerations by Commonwealth agencies of possible uses of the CDR are at an early exploratory stage and not at a public stage of development.”