A new government inquiry looking at expanding the Consumer Data Right before the scheme had actually launched is “premature”, according to the Financial Rights Legal Centre.
Treasurer Josh Frydenberg late last week announced a nine-month inquiry to examine ways the Consumer Data Right (CDR) could “further support innovation and competition”.
The CDR legislation was passed by Parliament last year and enables better data sharing in several industries. The CDR is being implemented in the banking sector first.
Most significantly, the new inquiry will consider whether the scheme is expanded to include write access to banking data, one of the most sought after reforms for FinTechs.
The inquiry will be led by King Wood and Mallesons partner Scott Farrell, who conducted the original inquiry that led to the government legislating the CDR.
The CDR scheme still hasn’t officially kicked off, with open banking set to launch by the middle of this year, before it is applied to the energy sector.
Mr Farrell will consult with industry, and consumer and privacy advocates before reporting back to government in September.
A core issue of the inquiry will be whether to expand the CDR beyond just the current read access to include write access. This would enable customers to apply for and manage products, such as by initiating payments from their bank account.
The payment initiation requests would give third parties the power to electronically pull money from a consumer’s bank account, with their consent. FinTechs have long been lobbying for this ability, saying it would help to promote competition and stop the big banks from stifling smaller FinTechs.
This reform was listed as a “high” priority recommendation by FinTech Australia in its submission to a Parliamentary inquiry into financial technology.
While the Financial Rights Legal Centre does not necessarily oppose this expansion, its policy and advocacy officer Drew MacRae said the focus should be making sure the first iteration of the CDR functioned properly before expanding it.
“The move towards expanding the Consumer Data Right to write access seems somewhat premature given open banking has yet to begin, safety and security rules have yet to be bedded down by the regulators nor has there been any substantive consumer testing of the regime,” Mr MacRae told InnovationAus.
“Financial Rights is not necessarily against the principle of write access. We are simply keen to ensure that the flaws in the CDR model that have a real potential to lead to poor consumer outcomes – including the lack of consumer protections to those whose CDR data falls outside of the CDR regime through non-accredited third parties – are sorted out before we go and supercharge the regime.”
The inquiry will also look at how the CDR can work with other frameworks to “enhance security, efficiency and the consumer experience”, primarily with the New Payments Platform.
In response to the inquiry, the NPP said that it is already developing the ability for customers to pre-authorise accredited third parties to initiate payments from bank accounts, which is what write access would allow for in open banking.
“This core foundational capability will enable a range of use cases, like recurring or subscription type payments, ecommerce, and ‘on behalf of’ services such as a corporate using a cloud accounting software provider to do their payroll run,” the NPP statement said.
“Having a standardised and consistent approach to this payment initiation capability will maximise its utility and provide a broad, scalable and secure approach to third party payment initiation, with the account holder’s specific authorisation.”
The inquiry will also be looking at how the CDR can be used to overcome “behavioural and regulatory barriers to allow consumers to conveniently and efficiently switch between products and providers”, along with other similar reforms around the world.
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