Open Banking Update: Open Banking in Flux
In late December 2019, the Australian Competition and Consumer Commission (ACCC) confirmed further delays to the scheduled launch of the Open Banking Regime.
Shifting Timelines of the Open Banking Regime and CDR
The first delay to the open banking regime was announced in January 2019 when Treasury released an updated timeline for the rollout of the Consumer Data Right (CDR) regime. The shift was largely due to the need to continue testing the robustness of the new infrastructure, which saw the July 2019 original launch date evolve into the commencement of a beta testing phase for only the major banks.
The updated timeline had February 2020 set as the new targeted public launch date, where consumers would be able to instruct the major banks to share their credit card, debit card and deposit account data with accredited third parties.
The subsequent delay announced late last year shifted the February 2020 launch date to July 2020, a full 12-months after it was originally supposed to roll out.
One of the key objectives of the Open Banking reform is to foster fair and healthy competition within the finance industry. In order to achieve this, there needs to be the exchange of highly sensitive data, which requires vigorous security mechanisms to be in place and relies heavily on new privacy considerations. The ACCC confirmed the additional lead time will be used to ensure the comprehensive testing of a system that the Australian finance industry will have to adopt in earnest in the coming years.
“The CDR is a complex but fundamental competition and consumer reform and we are committed to delivering it only after we are confident the system is resilient, user-friendly and properly tested,” ACCC commissioner Sarah Court said.
“Robust privacy protection and information security are core features of the CDR and establishing appropriate regulatory settings and IT infrastructure cannot be rushed.”
Under the new timeframe, major banks will have to share data on credit and debit cards, deposit accounts and transaction accounts from July 1, 2020. From November 2020, the major banks must be able share information relating to mortgage and personal loan accounts.
For ADIs outside the Big Four banks, the delayed implementation timeline will be:
- 1 July 2020 – product data for deposit accounts, debit and credit card accounts to be shared
- 1 February 2021 – product data for mortgages to be shared
- 1 July 2021 – consumer data on each of these product types to be shared
The postponement of the launch may have also been indirectly affected by ongoing pressures amongst the finance community, namely the FinTechs and consumer groups. In a submission to a Senate inquiry into fintech policy, FinTech Australia described the accreditation process for open banking as one of its top concerns.
FinTech Australia is a member driven organisation that is building an ecosystem for Australian fintechs to advance the global economy. The organisation represents more than 300 start-ups in the financial sector.
“Requiring a company to become accredited, expending significant time and upfront costs, simply to undertake initial tests is cumbersome and economically unviable,” says the submission. FinTech Australia estimates it will likely cost upwards of $100,000 for a fintech to become an accredited data recipient, increasing the barrier of entry to the markets that would be affected by the new regime.
From a consumer perspective, the accreditation process should be as comprehensive and vigorous as possible given the nature of the data being shared. Consumer groups, in response to the same Senate inquiry, are supportive of the accreditation criteria and CDR rules. Fintechs should not be exempt from the full accreditation process and the CDC rules should evolve if loopholes surface. The Consumer Action Law Centre, who is a non-for-profit consumer advocacy organisation, stated in its joint submission with The Financial Rights Legal Centre that the industry will need “well resourced regulators to provide adequate oversight and amend and improve the standards and recommend changes to the governing legislation, when and where FinTech arbitrage leads to demonstrably poor consumer outcomes”.