The Productivity Commission has raised concerns about the slow roll out of consumer data right functionality in the banking sector, arguing that banks, fintechs and other financial institutions are struggling to extract value from the new arrangements.
The commission’s critique of the banking sector was published this morning in the interim report of its inquiry into the use of digital technology and data in the Australian economy.
Although the banking sector was the first industry to begin rolling out CDR capability, the Productivity Commission observes that the potential benefits of the new data sharing arrangements have not been realised because some banks are providing “variable” data or have been slow to acquire full functionality.
“While the CDR rollout is progressing and providing strong foundations for consumer data sharing, a great deal of the value that could be created from this data portability has yet to be realised,” the commission states in its report.
“For example, in the banking sector, there are only 32 accredited data recipients and development of innovative products or improvements to customer service based on the CDR appear to be in their early stages still.”
The commission noted that the introduction last month of the ACCC’s CDR Sandbox could assist in improving the quality of data shared by banks.
The Sandbox is a free online tool that helps laggard banks and potential CDR participants test and improve their CDR solutions.
As reported previously in Banking Day only two of Australia’s four major banks – Commonwealth Bank and NAB - are full CDR participants.
Like other banks CBA and NAB were mandated to begin sharing data with other financial institutions following requests from their customers.
However, the two banks are now accredited to receive data from other financial institutions, as well.
That is not the case with many other Australian banks, including Westpac and ANZ, that are either struggling to build technical capability to participate in the system or are wilfully slowing their rollouts to thwart the risk of losing customers to other institutions.
The CDR system is an opt-in service that allows consumers to authorise a service provider to transfer their information to a rival provider.
One of the objectives of the CDR is to improve competition in industries such as banking by making it easier for consumers to switch between products and providers.
The commission’s interim report also raises concerns about the access of remote and rural communities to digital banking services following the withdrawal of branches.
The commission noted that 23 of Australia’s 48 regions had broadband and mobile connectivity infrastructure gaps that were undermining community and business access to services such as internet and mobile banking.
“Some regional and remote communities have poor internet connectivity, which can limit the ability of local industries to adopt productivity-enhancing technologies and reduce employment opportunities for local residents,” the commission observed.
“Inadequate and unreliable connectivity also contributes to social exclusion, as residents are less able to access essential services (such as health, education and welfare support) in an increasingly digitised world.”
Given that 40 per cent of national output was generated in regional parts of the country, the commission is considering making recommendations for the federal government to support increased public and private sector investment in regional telecommunications infrastructure.