Since its inception the consumer data right (CDR) has proven influential in developing Australia's digital economy. However this journey of digitalisation has only just begun. Originally implemented to allow consumers to transfer their data between third parties, the recent inquiry into the future directions of the CDR looks at how its functionality can be expanded.

Read on for a summary of the Inquiry's recommendations and implications to consumers and businesses.

CDR – Where are we at?

CDR kicked off with Open Banking on 1 July 2020. Consumers can now share banking data with businesses they elect, for use as they choose.

However the recent COVID-19 pandemic incited a rapid cultural shift, as Australian's moved online overnight, heavily relying on digital interactions to do their daily activities (from online grocery shopping to virtual team meetings). This shift saw consumers using and sharing more of their data than ever before, as our economy moved to become digitally and data dependent. The Government recognised that the pandemic heighted the need to expand our CDR infrastructure and functionality so that it remains ahead of consumer and business demand creating an innovative, productive and competitive data ecosystem.

The Inquiry's remit. Look to the Future

Early January 2020 the Treasurer announced an 'Inquiry into the Future Directions for the Consumer Data right (CDR)' (Inquiry). The Inquiry was asked to:

• make recommendations on options to expand CDR functionality, including how CDR could be expanded to include 'write access' so consumers can share data but also apply for and manage products;
• examine how CDR can overcome barriers so consumers can conveniently switch between products and providers;
• consider ways CDR can promote innovation and be inclusive of the needs of vulnerable consumers; and
• identify ways to leverage CDR for opportunities for consumers, businesses and the economy, and to leverage its infrastructure to support productivity and a more efficient and safer digital economy.

After an extensive consultation process with consumers and businesses, the Australian Government has now released its report for the Inquiry (Report).

The Report makes 100 recommendations to the Treasurer on options to:

• expand the functionality of the CDR;
• ensure the CDR promotes innovation (that is inclusive of the needs of vulnerable consumers);
• leverage CDR infrastructure to support the development of a safe and efficient digital economy; and
• leverage the developments of the CDR with other countries that are developing similar regimes to enhance opportunities for Australian consumers, businesses and the Australian economy.

Access the complete report

On our review of the Report and its 100 recommendations, the 3 takeaways we believe most relevant to expanding the functionality of the CDR:

• action initiation: how the CDR could be expanded to include 'write access' enabling accredited persons to apply for and manage products (including, the initiation of payments within the Open Banking regime);
• smart switching: how the CDR can be utilised to overcome behavioural and regulatory barriers to efficient switching between products and providers; and
• international leverage: similar regimes being developed in other countries and how Australia should be engaging with these countries to leverage the CDR.

Action initiation

Currently the CDR provides a secure set of channels through which accredited persons can communicate with data holders. However these channels are limited to read access only and accredited persons are limited in how they are able to best help consumers.

The Inquiry recommended opening these channels to allow accredited persons to initiate actions on a consumer’s behalf with the consumer’s consent.
Action initiation (also known as 'write access') enables consumers to conveniently and safely apply for, accept, or manage new products and services. Depending on the actions specified, an accredited person with action initiation authority could: apply for products on another’s behalf; update personal details; initiate payments; use products; and open and close accounts.

Enabling action initiation would pave the way for the CDR to facilitate a much broader range of functions, while increasing the range of products and services available to consumers.

Smart switching

Based upon recent Productivity Commission data, the average Australian household could save up to $1,000 per year on their home loan if they switched lenders. Many do not as without CDR-facilitated switching, the task is slow, laborious and inefficient.

Currently the CDR is setup to help consumers identify products that best suit their needs by analysing their consumer data, and comparing the range of products and services on the market. The consumer is then required to manually switch between products and services, closing one account and opening an another.

The Inquiry recommended expanding the CDR to support smart switching. This would allow the accredited person to initiate actions (with consent) on the consumer's behalf to assist with switching (e.g. give the data holder instructions to either open or close an account). Consumers would then be able to elect to automatically switch between products and services where the consumer has identified a better deal, or cost saving.

Smart switching helps to overcome many of the behavioural and practical barriers to convenient and efficient switching between products and providers. It can also stimulate competition and innovation in products and services. Providers will be required to be more responsive to market demands with their product ranges and pricing, as they are pressured to keep existing customers who may otherwise switch.

Beyond Australis border's

In recent years consumer-controlled data portability regimes (similar to the CDR) have been introduced, or further developed, worldwide. International regimes vary between regulatory-driven or market-driven approaches, so too the scope of data included and how standards are set. There is scope for interoperability and connectivity between the regimes and an opportunity to share learnings.

In this regard the Inquiry recommended these developments:

• cross-border consistency: applying common rules and technical standards to support consistency in the setting of key CDR standards and principles;
• cross-border connectivity: streamlining accreditation processes to recognise foreign regimes and support international data portability and interoperability of the regimes; and
• Australia as a proactive cross-border contributor: establishing an international CDR forum for countries with consumer controlled data regimes while formalising existing dialogue with international policy bodies.

These initiatives will pave the way for the CDR to become one of the leading data frameworks in the world. By connecting with similar overseas regimes, Australia will be able to better support international trade while promoting a sustainable data future. This will create new opportunities for providing data-driven services in the global marketplace while delivering a world-class digital economy for Australian consumers to enjoy.

So where to now?

The introduction of the CDR and Open Banking has been a success. It is now time to examine how the CDR can be built upon to support a robust digital economy with consumers at its core.

The Inquiry's recommendations provide a solid pathway for a CDR that remains consumer centric, encourages competition, creates opportunities and is efficient and fair. And is consistent with the guiding principles initially set out for the CDR.

As the implementation of the Inquiry's recommendations is expedited over the coming months, please get in touch if you require any further information.

We continue to work with many of our clients along all aspects of their open banking journey. We advise on legal and regulatory obligations under the CDR regime as both data holders and accredited data recipients. We also ensure clients are market ready to take advantage of the opportunities presented by the CDR and Open Banking.

Please contact us to if you want to know more about the Inquiry's recommendations, Open Banking and the future of CDR.