Expanding consumer data rights to open finance

Introduction

The Consumer Data Rights (CDR) regulation in Australia has already started providing benefits to consumers.

It is enabling them to share their data with authorized third parties since its launch in July 2020. Further, it supports reciprocity in data sharing among account servicing payment servicing providers (ASPSP), authorized data recipients, and customers to enable the building of a dynamic and flexible open banking system. 

Expansion of CDR

Currently in Australia, the expansion of CDR is a key priority in the government’s digital economy strategy.

Regulators in the country are undertaking several initiatives in this area. With the expansion of CDR, Australia has started embarking on the next step to open banking, namely open finance, where third parties can collect data from multiple sources such as mortgage, pension, insurance, and other industry data. Banks can capitalize on this opportunity to provide services beyond banking by opening up data sources from other markets. This will create synergies and benefit consumers.  

CDR in action

The expansion of CDR is expected to open up new avenues.

• New way to pay: CDR’s role in the PayTo rollout

PayTo is a payment initiation service that has been introduced as part of the CDR regime in Australia. The New Payments Platform (NPP) implements PayTo, which allows a payer to authorize third parties to make payments on their behalf. CDR collaborates with NPP and plays a key role in facilitating data-enabled payments. Before a payment is made, CDR helps verify the identity of the payer and payee, verify bank account information, and check if there is sufficient balance in the account. Apart from that, CDR data is also used to derive insights into a customer’s financial behavior.

The collaboration of PayTo and CDR can help banks compete more effectively with fintechs and other non-traditional players in the payments space. By offering a payment initiation service that is integrated with their core banking platform, banks can provide a more comprehensive, seamless, and compelling offering to their customers. This can help them retain existing customers and attract new ones.

• Enable action initiation

The current version of CDR allows read-only access to consumer data, which supports limited use cases. The functionality of CDR has been expanded to enable action initiation. This will allow consumers and small businesses to direct accredited data recipients (ADRs) to take actions securely and conveniently on their behalf. The actions include opening and closing accounts, managing products, and initiating payments. This will give consumers the ability to automatically move funds to minimize fees or optimize interest, automate payments toward an investment or savings goal, or switch to a better plan. Action initiation will make the CDR regime much more effective and will offer financial institutions a competitive advantage by supporting new and innovative business models.

• Industry-agnostic data sharing

CDR is on its way to becoming an industry-agnostic data sharing standard across all industries in Australia. Although CDR started with the banking industry, it has also gone live in the energy sector. The manufacturing sector and non-bank lenders are also designated to be in the CDR regime to support a data-driven economy.

Combining energy data with that from open banking, banks can offer more personalized products and services such as carbon footprint tracking. This will help customers understand the environmental impact of their lifestyle and enable them to take necessary measures to reduce its impact on the climate.

Using CDR data, consumers can take control of household expenses. Combining non-bank lending datasets with banking data means consumers will be able to compare lending products more easily and discover a better-tailored, more competitive deal. 

• New access models of CDR

Australia has expanded CDR data access by introducing new access models. They allow companies to access and use CDR data even if they are not accredited data recipients. Companies can access data through their accredited sponsor (sponsor affiliate model) or using a principal’s access (CDR representative model). Non-accredited data recipients can also use CDR data with customers’ consent for limited purposes (CDR insight model) such as balance verification, customer income or expense verification, and so on. Alternatively, they can nominate related professionals to access limited CDR data for providing advice to customers (trusted advisor model).

Different access models help more participants join the CDR regime to provide customers with new products and service offerings, making CDR more powerful.

• CDR in the SME segment

CDR is being extended to the small and medium enterprise (SME) segment, which will eventually enable SMEs to access a broader range of financial services. These will include business lending, accounting, cash flow forecasting and so on. Banks are increasingly collaborating with fintechs to develop innovative solutions for SMEs.