On Thursday of this week Australia’s open banking community will celebrate the first birthday of the ground-breaking Consumer Data Right (CDR), which has started in banking sector before moving out to energy and telecommunications.
This anniversary is also the next major deadline in the phased CDR regime. All the banks are now required to be registered as Data Holders, making API endpoints available to Accredited Data Recipients, so that consumers can easily and safely share their banking data to get a better deal in the market.
At the time of writing, the list of exemptions granted by the ACCC to the banks was longer than the list of approvals.
Australia’s consumers will have to wait a bit longer for the CDR to deliver Scott Farrell’s promises of choice, convenience and confidence. This is disappointing given that it is, after all, the consumer’s data right.
What policies do we need to make the CDR easy for consumers? The key to open banking’s success is consumer engagement.
There are three critical areas the government should focus on right now: banks must make their APIs available on time; more FinTechs must offer additional products; and consumers must have confidence to overcome hesitancy about data sharing.
To the first point, the banks must speed up compliance so that the consumer’s banking data can be shared via APIs with FinTechs in a robust fashion that is also operationally useful.
Banks may also choose to become accredited to receive data and establish their own competitive use cases.
To the second point, FinTechs need a roadmap and timeframe from the government in response to Scott Farrell’s ‘Future Directions for the Consumer Data Right’ report from October 2020. His most critical recommendations concern an action initiation framework, including open banking payments. The Government has said it will respond later in the year.
FinTechs urgently need the Treasury to clarify the rules around several current unknowns: joint accounts; tiered accreditation; and a sponsor/agent model.
Without this, it’s challenging for FinTechs to plan for growth and to establish a business case that justifies the dollars and time required to be invested to achieve full accreditation, which is currently the only option.
Reducing regulatory uncertainty will provide confidence, unleash new use cases and establish a strong foundation for the CDR before it rolls out to energy and telco.
Finally, to the third point, consumer awareness should largely take care of itself as market participants advertise their offerings, although there is naturally a role for the Government to play in establishing the overall legitimacy of the CDR framework.
What can we expect from 1 July?
Now the rollout will accelerate. From 1 July, bank customers will be able to ask for data to be shared from term deposits, transaction and savings accounts, and debit and credit cards.
From November 1, home and personal loans are added to the list. Finally on 1 February 2022, a range of new banking products will be included, such as overdrafts and lines of credit, foreign currency accounts and business finance.
It took the UK 24 months to get 1 million customers to engage with open banking from when it was launched, according to Open Banking UK. It took eight months for the next million and just over six months to hit 3 million.
The acceleration was due to network effects: as more people got used to open banking, more competitive opportunities were created, and consumers had more choice and convenience.
It’s a virtuous circle.
Time to bring out the cake
This last year, the Big 4 banks and the FinTech community – especially Frollo and Regional Australia Bank – have done a lot of heavy lifting to achieve some 10 million API calls enabling live consumer data sharing.
Other organisations that will be celebrating the CDR’s birthday include FinTech Australia, Finder, Adatree, Biza.IO and TrueLayer. The foundation is laid.
With the first birthday of Australia’s CDR upon us, the opportunity is here to launch the next stage of powerful open banking use cases.
In time, we can open up the whole of finance with smarter and more consumer-centric financial services that will benefit every industry.
Brenton Charnley is Head of Australia at TrueLayer
Do you know more? Contact James Riley via Email.