Open banking

While the new open banking regime officially launched on Wednesday (1 July 2020) with the four major banks (who are now able to share customer data in relation to deposits, transaction accounts, credit and debit cards when consumer consent is given), the rules around how third parties access and use the data is still under consultation.

Last week, the Australian Competition and Consumer Commission (ACCC) launched a four-week consultation on new rules relating to the Consumer Data Right (CDR).

Currently, the rules do not provide for the use of third-party service providers who collect or facilitate the collection of CDR data on behalf of accredited persons (i.e. intermediaries).

Following industry feedback, the ACCC is now consulting on new draft rules that would authorise third parties that are accredited at the “unrestricted” level to collect CDR data on behalf of another accredited person.

“This will allow accredited persons to rely on other accredited persons in the CDR ecosystem to collect CDR data, and to provide other services, that facilitate the provision of goods and services to consumers,” the ACCC said in its consultation documents.

However, financial data aggregation company Moneytree has warned that the draft rules for the management of CDR may prevent Australian consumers and businesses from realising the full benefits of open banking.

It is therefore now advocating for the rules to change to allow intermediaries to disclose, as well as collect, CDR data to accredited intermediaries.

Ross Sharrott, founder, CTO and executive director for Moneytree Australia, said that while the draft rules are “a step in the right direction” towards allowing intermediaries to use CDR data longer term, he suggested that the draft rules could “significantly curtail” the effectiveness of open banking in Australia by “unnecessarily” delaying the creation of a robust CDR ecosystem.

“The CDR’s purpose is to provide people with control over their data to help them become more efficient and successful, and data intermediaries are a key part of making this purpose a reality,” Mr Sharrott said.

“The ACCC has strongly acknowledged the importance of data intermediaries to collect CDR data from data holders as they support the uptake of the CDR and the development of innovative new products and services. We fully agree with these comments but believe the importance of swiftness in including data intermediaries to successfully facilitate innovation has been overlooked.

“One important benefit of the data intermediary model over the outsource provider model is that the intermediary model accelerates more participants in open banking, leading to faster innovation,” the Moneytree CTO continued.

“Delaying the full disclosure of CDR data to intermediaries will discourage innovators from participating in open banking and will not make the Australian finance sector more competitive,” he said, adding that it was also “disappointing”, given greater participation could “assist Australian consumers and businesses in the post-COVID-19 recovery”.

Moneytree is therefore advocating for a tiered CDR accreditation system that could enable more entities to participate in open banking, which it said would create greater competition and increased choice for consumers.

“By introducing a tiered accreditation system from the outset, more entities will be able to participate enabling consumers to receive the full benefits of open banking,” Mr Sharrott added.

“By providing lenders with automated and accurate data over and above what is available on credit scores, data intermediaries can help improve the flow of credit to Australians at a time when it is needed most and minimise the potential risk of fraudulent activities.

“For people to derive the greatest value from open banking, they need to have the ability to share their data with intermediaries at their discretion, which will help them compare offers, access cheaper products and switch to new services.”

Moneytree particularly noted that the open banking system in the UK enables companies that wish to use data to become an “agent” of a fully accredited recipient without having to do “the costly and time-consuming steps of building, testing and getting their own systems accredited”.

“Many of Australia’s major incumbent financial institutions have publicly stated they are supportive of the full participation of intermediaries in the Australian CDR ecosystem if appropriate security requirements are in place,” Mr Sharrott continued.

“As the rules stand, ADIs will have fewer choices with whom to partner as outsourced providers are limited and don’t have the open banking experience that data intermediaries can provide.

“I urge the ACCC and Treasury to resolve this unintended policy outcome and reconsider the draft rules to authorise the full disclosure of CDR data to intermediaries. This will encourage greater innovation in financial services, which will assist people and business, as well as the overall economic recovery from the COVID-19 crisis,” he said.

Interested parties will have until Monday, 20 July 2020, to provide submissions on the proposed rules. Submissions will be published on the ACCC website.