As part of the CDR, consumers will have the right to access data from their own interactions with service providers and share it with third parties, such as comparison sites. This should improve their ability to compare products and services. If consumers have more control, it is suggested that this will make providers more competitive.
The consumer can share their data with a competitor to gain a better understanding of what they are being offered from competitors and to find the best deal for what they need. This should encourage providers to put the customer first and provide the best user experience, otherwise consumers will go elsewhere.
But how will the CDR affect the financial services industry?
An Open Banking system
The first step of the CDR, as proposed by the Australian government, are plans to establish an Open Banking system, focusing on how data sharing could improve and change the banking sector.
Open Banking is a system of data sharing that gives users control over their own data. Through an application programming interface (API), users can share their financial data, which currently sits in their bank, with other companies who are offering financial services competitively. Users can then compare product offerings to find the financial product that best suits their needs, from credit cards to mortgage and savings account products.
The Open Banking Review final paper was released recently, containing a framework for an Open Banking system in Australia. For implementing and managing an Open Banking system in Australia, the review made 50 recommendations:
Put the customer first. An Open Banking system should share both customer and transactional data, when asked by the customer. There cannot be a charge to the customer for data transfers, and they must be able to view their own usage history. This gives the customer control over their own data.
Make competition. Companies must also allow consumers to share information with other accredited companies, through an API. By allowing customers to share their own data, searching for the best deal, companies will become more competitive and in doing so, should put the customer first in their decision making. Putting the customer first and creating competitiveness both allow the CDR to be scalable into other sectors in Australia.
Create and maintain standards. For Open Banking to work in Australia, they suggested that transfer, data and security standards would be essential. This would be done through a Data Standard Body, who would ensure that these standards are met. It wouldn’t include the deletion of data, which the review recommended was beyond the scope of Open Banking. In order to be accredited, parties would need to comply with security standards.
Have accreditation requirements. In order to be involved in an open banking system, parties would need to be accredited. This would ensure that consumers who share their data are sharing it with a company who is safe, because accredited parties comply with these standards. The ACCC would be in charge of accreditation.
Have a public address book. For customers to know who is accredited, the Open Banking Review suggests a public address address book.
Have avenues to address complaints and remedies. The review made a few recommendations for complaints and remedies. Both consumers and companies would have multiple avenues for making a complaint and seeking a remedy.
They announced that the CDR will be implemented across the whole Australian economy, initially with the banking sector, then within the energy and telecommunications sectors, followed by more.