As a proud Aussie, even I will admit there aren’t too many occasions where we are seen as a leader. Great cricket and rugby teams sure, and some amazing cultural exports too. But when it comes to finance more broadly, our nation has tended to be a bit of a laggard.
Not anymore. With the Consumer Data Right (CDR) the country is now a testing ground for many of the elements that form the concept behind open finance. The CDR is taking some of the ideas and notions from open banking and even rules such as GDPR and extending it across other data sets that encompass our financial lives.
The CDR promises to empower consumers to use and re-use their data in new and meaningful ways. To say this is revolutionary for Australian financial services and beyond is not overselling it. Much like the UK, the market has been dominated by a core of large banks, aka ‘the Big Four’ of ANZ, Commonwealth Bank, NAB and Westpac.
Even before the CDR came into force, we saw the Australian Prudential Regulation Authority (APRA) change its licensing regime in an attempt to inject some innovation into the market. That change saw a wave of FinTechs and challenger banks being established, starting with Volt and swiftly followed by 86 400, Douugh and Up.
We also see established firms from the UK and Europe such as Revolut, pursuing growth in the country.
A quick look back at the CDR in 2020
After a false start and a shift in dates due to the unfolding pandemic and other timing pressures, the CDR has arrived – here are the highlights:
- CDR went live on 1 July with the ‘Big 4’ banks, including savings accounts and term deposit data
- CDR rules consultation released by the ACCC in September
- Phase 2 of the Big 4 data was set to be made available on November 1st including home loans, personal loans, direct debits and scheduled payments. However, not all of this data is available yet. A rectification plan has been set by the ACCC through to July 1 next year for the Big 4 to meet this data sharing requirement
- Four data recipients accredited
- Nine data holders registered, with ING, AMP & Regional Australia Bank, Beyond Bank & Community First Credit Union joining the ‘Big 4’ banks
- Intermediary rules launched, but both parties still needing an ADR license to access CDR data
- CDR Rule making authority shifted from the ACCC to Treasury
- ACCC released guidance on the Conformance Test Suite & Accreditation
The future looks promising. However, there are still some things that need refining to maximise the CDR’s potential and support sustained innovation in the Australian market.
8 predictions for the CDR in 2021
Primarily there needs to be a balance struck between safeguarding consumers from harmful data sharing practices, and the restrictions placed on the data that can be shared and who it can be shared with.
The concern is that some restrictions could hamper competition, create unnecessary technical complexity downstream and increase barriers to entry.
The knock-on effect is a CDR regime that only works for a narrow set of use cases or can only be delivered by organisations that are willing to incur the significant costs of becoming accredited in their own right.
With that in mind, here are some predictions for the CDR over the next year:
- Business transactions will be added to the account types which will drive a significant increase in API call volume driven by accounting platforms and SME lenders
- The Sponsor and Affiliate model will be implemented, enabling more Data Recipients to participate, especially FinTechs and non banking players
- Major and non-major banks will be focussed on compliance with their API obligations in the lead up to 1 July 2021, but will start considering how they compete by becoming Accredited Data Recipients themselves
- The CDR rules will be updated to enable Trusted Advisors (particularly brokers and accountants) to access data and to improve the services and advice they provide to consumers using CDR data
- We will see more non major banks going live on the CDR Register before the 1 July compliance date
- PFM and lending use cases will continue to be focus for many in 2021, with the majority coming to market in Q3 and Q4 next year as a critical mass of Data Holders become registered from 1 July
- Scott Farrell will release his recommendations on “write access” in early 2021, as we await a key decision on the use of open banking-style Payments Initiation Services (PIS) or the NPP Mandated Payment Services for write access
- New use cases outside of banking will be explored in eCommerce, Wealthtech, marketplaces, accounting and more following on from the trends in the UK and EU.
There is genuine optimism about the potential of the CDR. With the rules opening up data sharing and new entrants coming into the market, the future looks bright.
Consumers will benefit from more choice, greater access to services and potentially reduced costs due to greater competition for their business. It could also act as a catalyst for the country’s FinTech industry, leading to some homegrown firms that can grow internationally.
However, its development needs to be closely monitored and iterated to ensure it meets the original stated objectives. 2021 is going to be fascinating as the roll out continues and the wider financial services market observes its evolution as a first step towards open finance.
Brenton Charnley is Head of Australia at TrueLayer