How the recent changes to CDR impact Australian FinTechs and consumers

How the recent changes to CDR impact Australian FinTechs and consumers

By Tim Poskitt, Country Manager ANZ at Envestnet | Yodlee

Since the consumer data right (CDR), the legislation that governs open banking in Australia, was initially introduced in 2017, Envestnet have made great strides towards embracing an open data future with CDR being expanded beyond the banking sector and significant government investments backing the initiative.

Over the past few months, Envestnet have seen some of the most significant advancements since the CDR went into effect five years ago. Monitoring those changes in our perpetually evolving legislative landscape is challenging, so let’s explore some of the recent developments and the impact they’re set to have.

1. Leveling the playing field via new access models

In October 2021, the Australian government announced it would add three new access models to the CDR legislation, allowing companies to access and use CDR data without having to go through the expensive process of becoming an accredited data recipient. Instead, third party providers and intermediaries could act as a CDR representative or sponsor for other financial institutions.

As of 1 February 2022, these new models officially took effect. Australia has expanded access to CDR data via the introduction of the Sponsor-Affiliate model, which allows an unaccredited affiliate to access CDR data via their accredited sponsor; the Trusted Adviser model, which will see consumers being able to nominate a professional, such as a financial or legal advisor, to access limited CDR data for the purposes of providing advice; and the CDR Insights model, which will allow unaccredited third parties to use CDR data for the purposes of a yes or no decision, such as account or balance verification.

2. Open finance: expanding CDR to non-banking sectors 

In mid-March, it was announced that the CDR would be expanded beyond the banking, energy and telecommunications industry to include non-bank lending, insurance, superannuation and payments data. This expansion is set to provide Australian consumers with a more holistic view of their finances, allowing for a comparison of a wider range of lending products, and spur the creation of more competitive and personalised products.

With consumer’s consent, for instance, a comparison site would be able to analyse an individual’s specific needs, allowing them to select a specific product with the confidence of knowing that the selection of products are tailored to meet their specific need or want.

Take the telecommunication industry – individual components of a telecommunications plan including data, calls and text, among others are all analysed depending on a consumer’s specific circumstance and a recommendation is made; one that’s affordable and aimed to meet that individual’s needs. This would make it simpler for consumers to switch onto a more affordable plan, encouraging competition and innovation in the sector – ultimately benefiting Australians through better and more affordable telecommunication products.

3. Funding the open banking regime in Australia 

Last year’s federal budget saw an impressive AU111.3 million invested into accelerating the rollout of the CDR, allowing Australia to make strides in becoming a global leader in open banking. In this year’s Budget, however, a more modest figure of AU38.4 million is being invested over the next three years from 2022-2023, and a further AU12.6 million per year ongoing from 2025-2026. Open banking has the distinct advantage of driving forward financial innovation, improving financial products and increasing financial wellness by enabling consumers to see all their finances in one place. As such, it’s important that we continue to develop the momentum we’ve seen over the past twelve months.

Australia is rapidly becoming a global leader in open data regimes, and both the Australian financial ecosystem and everyday consumers stand to benefit significantly from it. As the CDR continues to be expanded to more sectors, expect financial products and services are set to become more powerful across a broad range of use cases. The ultimate objective is for Australia to have a truly open data economy that provides consumers with industry leading products and services. The recent developments to CDR are taking us one step closer to realising that objective.