Draft rules for the management of the Consumer Data Right (CDR) prevent Australian consumers and businesses from realising the full benefits of open banking, according to Moneytree KK, the parent company of Australian open banking player Moneytree Financial Technology.
The draft rules, released on 22 June by the ACCC, do not authorise the disclosure of CDR data to accredited data intermediaries while allowing “outsource providers” to help accredited recipients.
Moneytree says it is advocating for a tiered CDR accreditation system that will enable more entities to participate in open banking and thereby level the playing field in financial services in Australia. This will provide healthier competition and increased choice for consumers.
Ross Sharrott, founder, CTO, and Executive Director for Moneytree Australia said while the draft rules are a step in the right direction towards allowing intermediaries to use CDR data longer term, the rules as drafted will 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,” said Sharrott.
“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.”
According to Sharrott, 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.
“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. 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,” he said.
“The delay is particularly disappointing given that greater participation in the CDR, aided by intermediaries, could assist Australian consumers and businesses in the post-COVID-19 recovery.”
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, according to the company.
“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.”
Data intermediaries are already a central element of open banking systems overseas. In the United Kingdom, companies that wish to use data can 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. This has led to many intermediary companies providing innovative solutions faster to the market without compromising the security or privacy of open banking, Moneytree claims.
In Japan where open banking has been evolving since 2015, standardisation and enrichment of data carried out by companies like Moneytree has been a powerful enabling force for the success of open banking and led to the creation of innovative value-added services for consumers.
Sharrott said 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.
“Some have expressed concern that outsource providers cannot necessarily replicate the data governance which would need to be adhered to by accredited data intermediaries,” he said.
“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.”