The Consumer Data Right Bill: a more transparent future for your financial data

The Consumer Data Right (CDR) Bill has passed through the Federal Parliament today, marking the start of Open Banking and another step towards an open data future. The Legislation is designed “to give consumers more power and allow them to compare and switch between products and services more easily”. The reforms “will also encourage competition between service providers, leading not only to better prices for customers but also more innovative products and services”.

Open Banking empowers consumers to request their financial data is made available to accredited third parties such as utility providers, fintechs or other banks, leading to more transparent decision making for both parties.

This is not without challenges as banks will no longer just compete in the financial sector but in the data capture market, so it is important that organisations are ready not just to comply with the CDR, but to capitalise on the opportunities it presents. To do so, organisations will need the capability to handle the inflows and outflows of customer data from day one. The challenge is to have the capability to link customers to their data, and facilitate its exchange with other parties whilst maintaining data security – key to the success of Open Banking.

Information security and data privacy will also be critical enablers to ensure consumers and businesses have confidence in the regime.  The banks have invested heavily and will need to focus on managing new services and capabilities, for compliance requirements in the first instance, and for some, also commercial opportunities in areas such as consent management and digital identity.

Organisations also have to be ready to identify opportunities for efficiencies and the seamless delivery of new kinds of financial products and services. Competitive pressure between banks will increase and staying ahead of the pack may require partnerships with – or acquisitions of – fintechs or other third parties.

Other long term considerations are numerous, but few are as important as consumer education and engagement. Whilst the appeal of Open Banking is obvious to those in the know, many Australians will need to be shown why Open Banking is valuable to them – especially when it involves the sharing of their personal data. When the UK introduced Open Banking, only around 30 percent of consumers understood it. Australian organisations need to be prepared not only to inform their own customers, but the Australian public more broadly. A failure to do this could lead to the spread of misconceptions about the way data is shared.

To truly realise the potential of the new data ecosystem, banks need to explain what Open Banking is and show how it will genuinely enhance the financial wellbeing of their customers.

Open Banking of a more limited scale already exists in the UK, India and several European nations. The innovations in these economies range from apps that simultaneously manage all financial accounts down to public transport cards, to sophisticated yet nimble SME lending services. Traditional banking products are becoming more efficient in their delivery too. In the UK, Marks & Spencer Financial Services no longer requires most customers to supply bank statements when applying for a mortgage, as that data can be obtained using their Open Banking platform. These innovations are occurring in Open Banking systems where participation is voluntary and in the UK, currently limited to just nine banks.  Imagine the possibilities under the wide-ranging and comprehensive structure provided by the CDR Bill when it applies to multiple industries including telco, energy and superannuation.

The regulatory structure introduced by the CDR Bill is broader and deeper than most equivalent legislation across the world and the potential is there for Australia to become a testing ground for global banks based in other countries looking to introduce a similar regulatory regime.

Of course, this is all up to Australian organisations ‘seizing the day’ and fully realising the opportunities presented by the CDR Bill.

It all starts with Open Banking and if we get this right we should be able to look back in five years’ time and realise that by properly acting now, the banking industry was redefined to the betterment of Australian consumers and businesses.


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