open banking

Last year, Treasurer Josh Frydenberg called for an inquiry into how the functionality of the Consumer Data Right (CDR) could be expanded. Namely, the inquiry sought to understand how the CDR could be used to “overcome barriers to consumers conveniently and efficiently switching between products and providers”, and to consider ways to promote inclusivity among vulnerable consumers.

The inquiry, spearheaded by KWM partner Scott Farrell, reportedly considered formal submissions from 73 parties last year and has now released a swathe of recommendation in its full report.

The 257-page report makes 100 recommendations for the future of the CDR, broken down into four ‘directions’ or themes:

  • Beyond data sharing, towards data-empowered consumers
  • Beyond open banking, towards an economy-wide foundation
  • Beyond a standalone system, towards an integrated data ecosystem
  • Beyond Australia’s borders, towards international digital opportunities

The report emphasises the digital economy’s prevalence in CDR’s need to function effectively, alongside other frameworks and regulations, including consumer protection, information security, data protection and sectoral regulation.

Giving third parties more access

One of the main recommendations that could impact the third-party channel was the call for CDR to enable third parties, with a consumer’s consent, to initiate actions beyond requests for data sharing.

This could reduce many of the barriers to switching, as outlined in the ACCC’s report into home loan pricing.

While the CDR legislation currently allows accredited persons to “read” consumer data, the inquiry recommended that not only should regulated third parties operating outside the CDR be able to receive varying levels of data (with the consent of the consumer), but that these channels should be “opened to suitably accredited persons to initiate actions on a consumer’s behalf with the consumer’s consent”.

It reads: “Enabling action initiation would allow third parties to assist consumers in overcoming [switching] issues and reduce the complexity, time and costs to consumers seeking to carry out actions.

“Action initiation could support a range of actions that may be undertaken on the consumer’s behalf.”

These may differ depending on each sector but could include enabling accredited persons to initiate payments, update personal information, change billing delivery preferences, open and close accounts and assist consumers to switch from one provider to another.

“It may provide a channel for re-establishing scheduled payments and direct debits with a new provider,” the inquiry suggested.

In relation to mortgages, the inquiry added: “Switching may be greatly streamlined by enabling electronic lodgement of applications in standardised forms by accredited persons on behalf of consumers and could be enabled by action initiation.”

If such a change were implemented, accredited persons may be able to therefore design services that offer to undertake these actions independently, or in combination with, data sharing services, it added.

However, it added that this “action initiation” should also be governed by the CDR Rules and Standards and a “sectoral assessment process” should be created to determine “the suitability of sectors for CD action initiation”. The Office of the Australian Information Commission is also required to conduct a separate assessment of the potential privacy implications of designating the sector.

Moreover, banks would be obliged to accept accredited persons acting on behalf of the consumer as if they were the consumer. However, some respondents, including lenders, outlined that security measures would need to be put in place to ensure the legitimacy of specific action requests surrounding consumer applications for financial products.

Additionally, the inquiry said the CDR regime should oblige an accredited person to act efficiently, honestly and fairly in initiating actions.

“Enabling action initiation in this way would allow the CDR to facilitate a much broader range of functions, and increase the range of products and services available to consumers,” the report reads.

Additionally, the report outlines that the accreditation regime should implement tiered accreditation for action initiation, with those actions posing greater potential risk to the consumer requiring higher tiers of accreditation.

Should the recommendations come to fruition, the way brokers interact with their clients could drastically evolve into a much more trust-oriented and adviser-centric role, spurring on more frequent interaction.

Commenting on the report, Minister for Superannuation, Financial Services and the Digital Economy Jane Hume said: “I would like to thank Scott Farrell for producing a substantial and wide-ranging report which provides a clear vision for the Consumer Data Right, and also thank those who have contributed to the inquiry…

“The report is a valuable resource to assess the best next steps for Australia’s Consumer Data Right framework, which is putting Australians in charge of their own data. We know that moving data between providers can be laborious and complex. The Consumer Data Right is simplifying this process, giving consumers the right to request their data is transferred safely and securely and enabling easier access to lower-priced products.

“The Consumer Data Right will create a healthier competitive landscape and a fairer, more secure, consumer experience,” she added.

The government has said that it will engage with interested parties as it considers the report’s recommendations.