Australia’s FinTech and neobank industry is growing frustrated at the slow pace and arduous requirements of the Consumer Data Right (CDR) – once heralded as a landmark reform – and restless at the waning political attention to the new regime.
Delays, rule changes and an accreditation process routinely described as onerous have slowed the momentum from when Australia’s inaugural data portability scheme was first floated four years ago.
A robust Consumer Data Right scheme would entitle consumers to access to their data in a machine-readable way, something that could bring down walls to competition and spur innovation.
That has always been the plan for Australia’s scheme and stakeholders remain broadly supportive of it. But four years on from conception the goal remains a long way off in practice.
“Overall, open banking is an amazing first step,” said FDATA ANZ chapter lead Jamie Leach, whose organisation’s members include many of the FinTechs and neobanks involved in open banking.
“But there are some serious limitations to being successful in this country.”
Once the initiative of then Treasurer Scott Morrison and eventually his successor Josh Frydenberg, responsibility for the Consumer Data Right now sits with the Minister for Superannuation, Financial Services and the Digital Economy Jane Hume.
While Ms Hume has championed the transformative potential of the scheme and gained official ownership of it in December, she has also warned it will be a “slow burn” that most consumers will never be fully aware of.
When the scheme launched officially in 2020, requiring the big four banks to begin sharing their customers’ data, the government lauded open banking as a “game changing reform”.
At the time Treasurer Josh Frydenberg said 39 providers were working on accreditation which would allow them to receive the data. But nearly a year on only nine have achieved accreditation and just three are actively receiving data. Only one bank outside the big four has gained accreditation as a data holder.
Basiq founder and chief executive Damir Ćuća, told InnovationAus many FinTechs are struggling with the accreditation process because of the high bar it sets. His company is in the final stages of a process which has so far cost more than $100,000.
“For small FinTechs, they wouldn’t even be able to afford it, nor would they be able to pass the security requirements. The regulation itself is very onerous and very expensive.”
Mr Ćuća is on the open banking advisory board, which meets regularly with government about the roll out. He said the will is there from government and he remains confident about the potential of open banking. But there was “room for improvement” and more consideration needed to be given to the accredited data receivers that would ultimately use consumers’ data.
Basiq will embrace accreditation as soon as possible and move on from its current digital data capture method. But a lack of firms sharing data – non major banks aren’t yet mandated to share the data and Mr Ćuća expects many won’t be ready when they are – means there’s few practical use cases on the horizon.
As grumblings grew louder last year and a Senate inquiry called for a host of changes to the scheme, including a new independent authority to oversee CDR, the government reformed the scheme.
Overall responsibility for CDR was stripped from the consumer regulator and given to Treasury. The Data Standards Body, responsible for creating CDR data standards, also moved from the CSIRO to Treasury, which began work on widening the scheme.
At the same time, KWM partner Scott Farrell was commissioned to conduct another review, making 100 recommendations including moving from the read only model of CDR data the scheme was built around to an “action initiation” one where providers could act on consumers behalf.
Ms Leach, who also founded peak independent data authority Open Data Australia, says the market is increasingly frustrated about the move to Treasury, which has led to many discussions with industry being rehashed, prolonging delays to the finalisation of CDR rules.
“There have been quite a lot of frustration shown, especially over the last couple of months,” Ms Leach told InnovationAus.
“To think that the rules we were originally led to believe would be finalised by March last year. Then it became the end of the . Then [on] December 23 they brought out the third lot. We are now in April and still no closer to getting finalisation of the rules.”
Because of the need to create operating models based on the rules and develop tech stacks to support them, even short delays can mean significant set backs for participants, according to Ms Leach.
Many would-be participants are waiting on a rules finalisation before diving in, she said, and those that are already involved have are becoming “despondent” at the slow pace of decision makers.
There are also questions about the rigidity of the legislation, privacy protections and how consumers will be encouraged to participate, she said.
“We have done zero public education and awareness,” Ms Leach said.
“The budget has been set twice. Money has been made available and we still have done nothing. If we are going to see it successfully adopted in this country, people are going to need to know what it is.
“It’s not to be feared and that it can actually improve their customer experience.”
Infinity Bank founder Will Banks agrees more engagement across the board is needed to recapture Open Banking momentum but Australia’s largest banks have little incentive to progress the scheme.
“The big four banks dominate,” he told InnovationAus.
“Therefore there is no interest by them, really, to push it along and engage. It is more of an advantage for it not to happen because then those existing customers remain sticky.”
Mr Banks, whose Brisbane-based neobank is working towards a banking licence, is concerned that there appears to be little interest from the federal government in engaging on open banking and fintech policy broadly. And without a centralised open banking body, the scheme has lost direction, according to Mr Banks.