Open Banking Data Standards Development
There has been a lot going on with Open Banking over the last couple of weeks, with the ACCC issuing a Consumer Data Right Rules Framework, and a fifteen strong Advisory Committee set up to provide advice to the Data61-led Data Standards Body. This committee, which has all four major banks plus some FinTechs and industry associations, will develop the data standards that will enable the portability of consumer data.
Data61 has set up a collaboration site to solicit feedback from the wider banking community and make recommendations to the committee on for the technical standards, and we at Data Action have been commenting and proposing solutions.
ACCC Consumer Data Rights (CDR) Framework
Essentially, the ACCC in its role to enable competition and protect consumers’ rights has taken the Open Banking Report and is creating a set of rules which will bind participants.
The aim is for the big four banks to make data available on credit and debit card, deposit and transaction accounts by 1 July 2019, and mortgages to follow by 1 February 2020. According to the proposed rules framework, all other Australian ADIs, as well as the subsidiary businesses owned by the majors, will have an additional 12 months to comply.
The CDR will enable consumers to request that a data holder (i.e. their bank) share their data with either an accredited data recipient they have provided their consent to. Data holders will also have to make generic product information such as fees and terms and conditions available.
The ACCC also proposes data sharing occur via an API, and that in the first instance at least (though door is open for the future) data sharing is not subject to fees. Initially, the CDR will be restricted to current customers thus excluding ex-customers’ data.
The ACCC is proposing ‘derived data’ be included but not that resulting from ‘material enhancement by the application of insights, analytics or transformation by the data holder’, which remains outside the scope of the Open Banking framework. Rumour has it that the rationale for this change to the original proposal seems to be a fear that the majors may enhance data ever so slightly to stop its inclusion. The ACCC is still seeking feedback from the industry on this so it will be interesting to see how this plays out during the consultation period.
At a minimum, customer data will include customer name, contact details, account number, payees list and direct debit authorisations, account-level information and account-level contact details and any unique identifiers associated these data sets. Transaction data includes opening and closing balances, transaction dates, amounts and other category information. Product data includes type, name, pricing, fees and charges, features and benefits, terms and conditions and customer eligibility criteria.
Impact for the mutual banking sector and smaller ADIs
As the ACCC proposal stands today, the ADIs outside the majors cannot share their customers’ data before July 2020.
This is perhaps odd as the customer-owned banks exist for the benefit of their members, not shareholders. Being part of the launch of the Consumer Data Right in Australia would be a powerful way for these banks to deliver innovative outcomes for their members in line with their position to be a genuine alternative to the big four banks, so the smaller ADIs may push back on the rules and fight to be part of the first phase.
However, if they do, they could be opening themselves up to competitive forces from the majors and it is unclear what innovative new players will be active during the first year to partner them.
Further, not being required to comply with Open Banking for the first year could be a blessing if they can create winning acquisition strategies. This could be targeting niches of the majors through advertising and offering better (or cheaper) products and consuming the open APIs to enable easier switching and on-boarding.
It’s likely that there will be other winners too – those in adjacent industries such as insurance and superannuation will be able to gain additional (free) data to create new products or advice. It’s easy to imagine that a superannuation fund providing retirement planning would be able to offer better advice if they could get their customer’s full financial picture without having to ask for forms to be completed. Likewise, insight into a customer’s spending could create more nuanced coverage or pricing for say, life insurance.
Should the rules change and other ADIs go live in phase 1, DA as a provider of core banking APIs will be ready to comply with the legislation and standards.
To that end we’ve already created an API Sandbox where our clients (and their partners) can use supplied data sets and APIs using the UK data standard. When the Australian data standards are released, we will open the sandbox more widely to other FinTechs to enable experimentation and a new level of collaboration and innovation.
To find out more about Data Action and what we are doing to enable Open Banking you can contact us at firstname.lastname@example.org