Australia’s open banking system moves to an important new stage of its development on Thursday, when non-major ADIs join the big banks in making their consumer data available to consumers and their accredited data recipients.
“Phase 1” consumer data must be shared by non-major ADIs from July 1. This includes transaction, at-call savings and term deposit accounts, cheque accounts, personal credit and charge card accounts and business credit or charge card accounts.
They will have to start sharing phase 2 data from November 1. This includes residential home loans, investment property loans, mortgage offset accounts and personal loans.
Finally, phase 3 data comes into play in February next year. This includes personal and business overdrafts, business finance, investment loans, lines of credit, asset finance, cash management accounts, pensioner deeming accounts, retirement savings accounts, foreign currency accounts and consumer eases.
The big banks have been sharing phase 1 through 3 consumer data since February.
The chief executive of accredited data recipient Frollo, Gareth Gumbley, says that from July 1 about 90 per cent of consumer banking information will be available.
“We will have significant market coverage,” Gumbley said.
Frollo has a consumer app that allows people to use their banking data to make more informed financial decisions. But its main business is offering an outsourced ADR service to financial institutions. ANZ is a Frollo ADR client.
Gumbley said the emerging use cases for open banking, the first iteration of the Consumer Data Right, are aggregation, product switching and affordability reports.
Aggregation will allow consumers to see all their banking data at a single source and manage their finances more efficiently. And with a full customer view, ADRs will be able to offer service enhancements.
Gumbley said Commonwealth Bank’s decision to become an ADR and start promoting aggregation services has brought some competitive tension into the market, putting pressure on other banks to offer similar services.
ADRs offering product switching will make use of aggregation to assess whether a consumer would be better served with financial products that have different pricing or features.
In April, comparison site Canstar (another Frollo client) announced that it is developing a mobile app that will blend a range of financial wellbeing tools with its comparison service.
The Frollo platform will provide Canstar with feedback on consumers’ financial experience. Canstar will combine this with its own product data to alert consumers to money-saving product switching opportunities and other benefits.
Affordability reports will use CDR data to automate information gathering for lenders, helping speed up and streamline their credit assessment work.
Credit bureau illion, which is an ADR, launched the first product of this kind in May, when it announced a new risk rating service for credit providers based on consumers’ transaction histories.
illion’s head of modelling, Barrett Hasseldine, said transaction banking records provide additional information that can sharpen a credit provider’s underwriting. The data includes cash usage patterns, income frequency and loan repayment trends.
The rollout of CDR has had its problems. The biggest of them has been the large number of financial institutions seeking exemptions from the scheme’s administrator, the Australian Competition and Consumer Commission.
The applications for exemptions keep on coming. Last week, ME Bank was granted an exemption from sharing data direct-to-consumer until July next year and Arab Bank Australia was granted an exemption from all its consumer data sharing obligations until January next year.
In all, the ACCC has granted 41 exemptions and many of them are still in force.
Gumbley said the process has been more complex than many institutions expected. “Getting all the data in one place and making it available is a big job, which is made more difficult if financial institutions are using old versions of their banking software.”
Another problem is how the system manages joint accounts. Under the current CDR rules, each joint account holder must opt in before joint account data can be shared.
While one joint account holder may initiate a consent process with an accredited data recipient to share account data, the process will not proceed if any other joint account holders have not also indicated that they are willing to share account data.
In May, Treasury released a consultation paper setting out its plan for an opt-out approach, which would allow an individual joint account holder to independently share data on the joint account by consenting to an accredited person collecting and using the data from the joint account. Either joint account holder would be able to override this setting at any time and switch off the data sharing.
This proposal has yet to be approved.
The other problem is with tiered accreditation. ADRs are looking to bring other businesses into the CDR system under the umbrella of their accreditation, so that data could be shared with a mortgage broker, for example, without that broker having to be an ADR.
Gumbley said that under the current rules it is very difficult to get data from the consumer to the mortgage broker through the envisaged process of tiered accreditation. There is consultation on the issue but no solution has emerged yet.