Australia has ushered in open banking. The country’s Parliament has enacted a law on 1 August 2019 to carry out beta testing of this facility and 4 big banks – CommBank, NAB, Westpac and ANZ – were asked to make certain financial data available for the purpose. At present product data for credit and debit cards, deposit accounts and transaction accounts are available through APIs. These banks are required to provide access to consumers account and transaction data to credit and debit cards, deposit accounts and transaction accounts from February 2020.
Other banks would be required to provide access to product data, account data and transaction data by July 2020. By February 2021, these banks would be required to provide access to product, account and transaction data for mortgage products and by July 2021, every bank in the country will provide access to product, account and transaction data for personal loan and other accounts.
4 TYPES OF INFORMATION
As mentioned, there are 4 types of information that will be available under open banking: (i) product data, which is information about rates, fees and features for each bank’s products; (ii) customer data, which is personal information about a customer such as phone number, email address and home address; (iii) account data, which is about specific accounts information such as balances, direct debits and regular repayments; and (iv) transaction data, which is information about the transactions on a customer’s account, including how much he has spent and where he made the transaction. All this data can be accessed through publicly accessible APIs.
A customer of any of these 4 banks can send his data to authorized deposit-taking institutions (banks). Other institutions able to receive and hold data will need to be authorized in order to accept and hold data through open banking. So, instead of bringing in dozens of pages of bank statements to get a home loan or a mortgage refinancing, a consumer will be able to easily give other banks access to their financial records with a few clicks. This, some bankers explained, is like empowering the consumer with data and information and shifting the power balance to the consumer.
SEVERAL POSSIBILITIES
Open banking, specifically in Australia, affords several possibilities. One is signing up for a new product. Right now, it is easier to sign up for a product such as a loan or credit card with one’s current bank because it has all of his or her transaction history and identification documents in its system. With open banking, one will be able to direct his or her bank to send that information to any bank or lender so that signing up for a new product will be just as easy anywhere. In addition, open banking system offers budgeting apps and tools. A customer will be able to direct his banking data to be fed into a budgeting app so it can help him manage his money. Budgeting apps can help one categorize his money automatically, track and optimize savings.
UNIQUE APPROACH
Banking experts are of the view that Australia has approached open banking in the right way and is putting the necessary building blocks in place. While the UK model covered only payment accounts for the largest banks, Australia is offering the full range of financial verticals including loans, mortgages and investments though not from day 1. In the UK, some 250 companies have enrolled for access to open banking data to build innovative services that tackle everything from lending affordability and personal financial management to credit scoring and direct distribution. And this is expected to be replicated in Australia as the pilot is over and even Australian and UK governments are expected to facilitate partnerships.
While it is expected that the energy and telecommunications sectors will also be within the scope of CDR, the new regime is expected to give customers more control and choice over data held about them. The government considers that this will promote competition and innovation in the affected sectors as customers will be able to change their suppliers easily if they can direct their current supplier to provide their data to other suppliers or comparison services. The regime is also likely to impose significant additional privacy and data sharing obligations and penalties for breach. Also under CDR law, a consumer can be individuals, businesses and trusts. SMEs will have CDR rights. The Act extends coverage to those business customers and individuals who are reasonably identifiable from CDR data.
The Australian government has committed to applying the CDR eventually across the economy. Currently, all authorized deposit-taking institutions, other than foreign bank branches, will be regulated data holders and so banks, credit unions and building societies will need to comply with the new laws. Under the draft law, certain credit information such as credit infringements, court proceedings and information about personal insolvency etc is to be excluded.
The government has proposed penalties of up to AU$420,000 (or AU$2.1 million for businesses) to be imposed for misleading conduct relating to the transfer of CDR data and to breaches of the new privacy safeguards.
