The Consumer Data Right legislation was passed by the Australian parliament on Thursday, providing the legal framework for Australia’s open banking regime.
The CDR is a competition and consumer reform announced by the Australian Government in May 2018. Essentially a data portability right, the CDR will allow consumers to direct institutions to share their data, making it easier to compare services and switch providers.
CDR creates the legal foundation for open banking, mandating that customer data needs to be available by API. It will first be applied to the financial services sector, followed by the energy and telecommunications sectors.
CEO of the Australian Banking Association Anna Bligh said the CDR legislation, which underpins open banking, will increase competition across the industry.
“Empowering customers with the ability to use their data to drive a better deal on banking products has the potential to dramatically increase competition and foster innovation across the industry,” Bligh said.
“Passing this legislation for the Consumer Data Right provides the foundation for these reforms to be delivered.”
Phase one of Australia’s open banking regime commenced on July 1, with three of the four major banks voluntarily sharing generic product data.
The next phase of open banking, scheduled for February 2020, will require banks to make product and consumer data for mortgage accounts available. At this point, if the regulator is confident in the system, banks will also be required to publicly share consumer data about credit and debit cards, deposit accounts and transaction accounts, marking the effective start of open banking.
Bligh said the industry will continue to work with the government in the final stage of the introduction of open banking to deliver a system which both increases competition and ensures data is kept secure.
“By the end of August the industry expects the ACCC will issue the ‘lock-down’ version of the rules governing the system,” Bligh said.
“Following the passage of the legislation and the ACCC guidance on the rules, the industry, together with regulators, will begin rigorous testing to ensure the system is safe for Australian bank customers to use.”
Nick Caley, VP, Financial Services & Regulation, ForgeRock, said passing the bill is good news for consumers.
“A fundamental shift in the dynamics of information exchange between business and consumers is taking place. In a climate where customers have become increasingly wary about data misuse and abuse, there is a golden opportunity for the banking sector to become the poster child for consumer rights,” he said.
Caley also argued it is an opportunity for businesses to create a competitive advantage by delivering secure and personalised customer experiences.
“By putting consumers in control of how and under what circumstances their information is shared, implementing dynamic consent and taking transparency seriously, organisations will be able to grow consumer trust and build positive and long-term relationships.”