What's next for Australia's Consumer Data Right after action initiation - and the lessons from overseas

Despite being drafted and tabled in the Australian Senate in 2022, the Action Initiation Bill was only passed last week.

Action initiation would transform the Consumer Data Right (CDR) from merely a data-sharing framework into a dynamic system that empowers consumers to take action based on the insights they gain.

The CDR was created to facilitate safe, real-time data sharing with entities that can provide services and products. It is the core of our digital economy. However, Assistant Treasurer and Financial Services Minister Stephen Jones recently announced that the government will reset the CDR. He argued that the costs are too high, there is a lack of innovation and low consumer engagement, and that data restrictions are a barrier to uptake.

But what does it all mean?

Despite the initial vision, what has been achieved is yet to deliver the holy grail of Digital Economic Reform. Many of the decisions made over the last six years need to be reconsidered and rescinded, whether that is amendments to legislation or the paring back of rules.

If Minister Jones is serious about moving forward, we need to address the costs of the CDR for all parties involved, not just the data holders.

Is the CDR on track?

Amid the various ongoing debates on the topic, key questions consistently come up: Is the CDR progressing as planned? Should it continue? Are consumers reaping the promised benefits? The answers are no, yes, and not yet.

Despite the current stagnation of progress, the reasons for introducing the CDR and its potential impact on the Australian economy remain essential. Its alignment with the global rollout of Digital Public Infrastructure aims to improve consumer experiences, alleviate cost-of-living pressures, and enhance internal efficiencies for participating businesses. This framework is still positioned to be a foundational element of Australia’s digital evolution, just as it was when Dr Scott Farrell released his initial review in 2018.

Six key tactics to progress the CDR

How can we get the CDR back on track? Here are six key tactics:

Revamp privacy legislation

Without a strong privacy framework like the General Data Protection Regulation (GDPR), efforts to protect consumers have resulted in an overly detailed framework with unintended consequences. Updating the Privacy Act to align CDR with a robust framework could eliminate the need for complicated accreditation processes.

Simplify accreditation models

Unlike thriving jurisdictions, Australia has developed a complex accreditation system that prevents some existing businesses from obtaining accreditation and serving their current customers. Simplifying these models would allow businesses to gain accreditation and better serve their customers.

Strengthen compliance and enforcement

The Australian Competition and Consumer Commission (ACCC) has been hesitant to enforce compliance among data holders, leading to concerns about industry self-regulation. Accurate real-time monitoring of participants is crucial to maintaining consumer trust and ensuring application performance, as seen in the UK’s Open Banking regime. Proper monitoring can prevent issues like those that undermined consumer trust in the UK’s early Open Banking efforts.

Create a dedicated implementation entity

It’s essential to separate enforcement from implementation. The Data Standards Body (DSB) and the tech infrastructure (Register) should operate independently of the regulator. A dedicated implementation agency should be established to focus solely on delivering the original CDR vision, incorporating the DSB and the Registry.

Set clear success metrics

Establishing clear success metrics is crucial for objectively assessing the health and maturity of the CDR regime, without the influence of well-funded industry groups. These metrics should include goals for participation, data recipient and holder metrics, and API performance indicators.

Launch public education and awareness campaigns

Despite funding, no public education or awareness campaign has been launched. The UK’s Open Banking Implementation Entity (OBIE) identified the lack of public education as a significant barrier to adoption. Australia should learn from this and launch a national education campaign to promote CDR adoption.

Learning from the UK and Brazil

Australia can gain valuable insights from the Open Banking implementations in the UK and Brazil to enhance its system. Here are some key lessons:

From the UK:

Strong Regulatory Framework: The UK has a single entity (OBIE) managing Open Banking, whereas Australia involves multiple regulators (ACCC, APRA, and OAIC). This led to lower costs of compliance, lower barriers to entry, and a shorter accreditation period for participants.
Simplification of Accreditation Models: The UK uses a tiered accreditation model, where different levels of access and responsibilities are granted based on the type of data and services provided. This allows smaller firms to participate without needing full accreditation.
Inclusion of Payments within Open Banking: Including payments in Open Banking aimed to introduce more competition in the payments market. By allowing third-party providers to initiate payments directly from customers’ bank accounts, it reduced reliance on traditional card networks, which often come with higher fees.
Innovation and Competition: By providing an alternative to card payments, Open Banking aimed to reduce transaction costs for merchants. Lower fees can lead to savings for businesses, which can be passed on to consumers in the form of lower prices.
HMRC: HM Revenue & Customs (HMRC) has rolled out Open Banking for various tax types, including Self-Assessment, Corporation Tax, PAYE, and VAT. This method has been used to make millions of tax payments worth billions of Pounds.

From Brazil:

Phased Implementation: Brazil’s Open Banking rollout was divided into four phases, allowing for gradual adaptation and improvement over a condensed period.
Inclusive Financial Services: Brazil’s Open Banking aims to include unbanked and underbanked populations by promoting financial inclusion via a multitude of use cases and apps.
Interoperability with Other Sectors: Brazil’s Open Banking is moving towards Open Finance, integrating other financial sectors like insurance and investments. The extension will allow a comprehensive view of consumers’ financial position to be considered in the provision of products and services.

By learning from these examples, Australia can strengthen its Open Banking system, fostering innovation, competition, and financial inclusion.

To truly progress Australia’s CDR, it is essential to address the challenges and leverage the lessons learned from other countries.

By concentrating on the six tactics for reform, and setting a comprehensive roadmap for the reset Australia can ensure the CDR fulfils its potential.

These steps will not only enhance consumer trust and engagement but also position Australia as a leader in the global digital economy.

The journey may be complex, but with a clear vision and committed effort, the CDR can become a cornerstone of Australia’s digital future. Australia has been gifted with an opportunity for a do-over, and the ability to get it right going forward. We must seize this opportunity.