What the government needs to do to break the Consumer Data Right deadlock

The promise of the Consumer Data Right (CDR) was a future where businesses are empowered to make informed, confident decisions based on a comprehensive understanding of their financial health.

Yet, despite the significant potential of this initiative, its implementation has been mired in unnecessary complexity, lack of clear guidelines and the reluctance of traditional financial institutions to fully embrace the change.

We are at a pivotal moment.

The deadline for submissions on proposed changes to the CDR’s consent and operational rules is fast approaching on September 9, after Assistant Treasurer Stephen Jones recently announced a ‘reset’ of the scheme. What is decided in these next few weeks and months will have lasting effects on businesses across the country, and there are a number of important factors to consider in those submissions.

Banjo Loans CEO Guy Callaghan

One of the most critical issues facing the CDR is the lack of clear policy settings around business disclosure responsibilities and the role of business advisers.

When we speak to Banjo customers about this topic, they tell us of their confusion about how the system works. It’s easy to understand why they’re feeling that way. Left without a clear delineation of responsibilities, businesses are left navigating a system that should be empowering them but instead leaves them in a state of uncertainty.

The government must establish unambiguous guidelines that outline what businesses are expected to disclose and how advisers can assist them in making the most of the CDR. This clarity is not optional; it is a necessity for the effective functioning of the entire system.

Bank reluctance

At the same time, the reluctance of banks to fully implement the CDR is a significant barrier to its success. Banks are dragging their heels, driven by a fear of losing customers in a more competitive environment, where it’s easier for consumers to compare products and switch providers.

But this stance is short-sighted. Banks need to recognise that they are merely custodians of consumer data, holding it in trust. This data belongs to the consumers, and they have every right to use it in ways that benefit them the most. The refusal to facilitate the easy flow of this information not only undermines consumer rights but also stifles competition and innovation in the financial sector.

The ultimate vision for the CDR is to create a unified financial ecosystem where all transactions and data utilisation is centralised. This could lead to the improvement of financial services across a wide range of industries, making financial management more seamless and integrated into everyday business operations.

The opportunity here is immense. Imagine a world where businesses have a complete picture of their financial health at their fingertips, enabling them to make decisions with confidence and clarity. This is not just a theoretical ideal—it is a practical necessity in today’s fast-paced digital economy.

Embracing change

The CDR can help make financial data more useful, but its success depends on the willingness of all stakeholders to embrace change and work together towards a common goal.

The CDR can drive better outcomes for consumers and businesses alike by promoting transparency, competition and efficiency in the financial sector. It can enable businesses to see the full picture of their financial standing and make decisions that are informed, strategic, and timely.

But to achieve this, we need a clear, streamlined framework that reduces complexity and costs for participants while maximising the benefits for consumers.

The proposed changes to the CDR’s consent and operational rules are a step in the right direction, but they must be implemented effectively and without delay.

CDR obligations in the banking sector started in July 2020. Since then, the process has been long and, at times, slow, littered with hurdles, delays and dare we say it, stalling. It’s imperative that the current consultation process not be used as an excuse for further postponements.

The CDR is not just a regulatory obligation—it is a transformative initiative that has the potential to redefine how we manage and utilise financial data.

It is time for all stakeholders to step up, engage in the process, and ensure that the CDR is implemented in a way that delivers on its full potential.

Let’s not waste this chance to build a better future for Australian businesses and consumers.