Consumers will be granted new rights over their banking data from July next year, with the government this week announcing it would implement the recommendations of the Review into Open Banking.
Under the regime, banks and financial institutions will be obliged to share all information provided to them by customers and former customers, whenever they request it. They will also be obliged to share all transaction data in “a form that facilitates its transfer and use” and make public details about the price, fees and other charges of their products and services.
As well as being given ownership of their data, consumers will be allowed to instruct their bank to share their information, in full, via a dedicated API which is expected to be based on technical specifications of the UK’s similar model.
Financial institutions will also be obliged to make transfers of data completely free of charge.
“Open Banking has the potential to transform the competitive landscape in financial services and the way in which Australians interact with the banking system,” the Treasury said in a statement.
“It will give banking customers greater access to the data their banks hold on them and the ability to direct that it be safely transferred to trusted and accredited service providers of their choice.”
It is expected the changes will make it easier for consumers to find better deals on banking products, and give rise to more accurate comparison services.
“This will help to break down barriers that see customers staying with their banks even when there are better deals elsewhere,” the Treasury said.
The Big Four banks will be required to meet the new obligations from July 2019 for all credit and debit card, deposit and transaction accounts, and mortgages by February 2020. Other institutions will have to meet their obligations within 12 months of those deadlines.
The major banks – currently facing a grilling at the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry – initially tried to halt and later to delay the changes. The deadlines are much closer than they are likely to have hoped for, with the Australian Banking Association arguing for a timeframe of 18-months after parliament passes legislation.
The government said yesterday that the deadlines were “challenging but realistic”.
The announcement has been welcomed by the Australia’s fintech industry, as access to customer data had been a major limiting factor in the usefulness of their products.
Industry body FinTech Australia chair Stuart Stoyan said the open banking framework will be a “game-changer for consumers and businesses” and “drive a new wave of fintech innovation and growth”
“Finally, customers will be able to use a regulated system to unlock the power of their own data to get access to financial services better tailored to their needs,” Stoyan said.
“This reform is expected to force downward pressure on lending costs, allow people to more easily manage their budget and be able to shop around for the best investments. They will also be able to easily switch their bank accounts to new fintech challenger banks. Put simply, this means better customer outcomes,” he added.
The Treasury said open banking would help customers by “disrupting those existing business models within the banking sector that do not put customers first”.
The government emphasised the importance of maintaining customer privacy and security under the regime.
“A key element of these protections is that only trusted and accredited recipients will be permitted to access data, only with customers’ express consent and only for the purposes the customer has expressly permitted,” the Treasury said.
All participants, including fintechs and start-ups, will have to comply with designated security standards which Data61, the data arm of the CSIRO, has been chosen to determine.
“Customers need to be confident that Open Banking is focused on giving them control of their data, that data recipients will take appropriate security measures to protect that data and that there are remedies available for losses that may be suffered. Without confidence about those factors, broad customer take-up of Open Banking will be limited and the initiative may not achieve its policy objectives,” the open banking report, commissioned by Treasury Scott Morrison in July last year and conducted by King & Wood Mallesons partner Scott Farrell, states.
The regime will be legislated through amendments to the Competition and Consumer Act (2010) with regulatory responsibility falling on the Australian Competition & Consumer Commission, supported by the Office of the Australian Information Commissioner with Australian Securities and Investments Commission, the Australian Prudential Regulation Authority and the Reserve Bank of Australia acting in an advisory role.
The open banking measures come as part of the government’s broader ‘Consumer Data Right’ which will expand sector-by-sector, beginning in banking, energy and telecommunications. It will eventually “apply economy-wide” the government said.
Legislation is expected to be introduced this year. In this week’s budget, the government earmarked more than $65 million to fund the new rules that will give consumers greater control over their personal data and make more public-sector data sets available for businesses, agencies and researchers.
The moves – which include establishing the position of a ‘National Data Commissioner’ come in response to the Productivity Commission’s 2017 report on data availability and use.